Post-discussion earning results: Yee-ouch! Right in the kisser! You'd think we done good. Except for meeting expectations. And how does The Street treat those who come up short?

It slaps them with a 2.5.

Let's see, after hours check-in has us down over 6% to $25.59. Yes, the commenter who sold at $27 yesterday is looking pretty bright right tonight. So we did not meet expectations.

The webcast was pretty boring, until after just over an hour Rick Sherlund of Goldman Sachs probed quite deftly regarding how the numbers didn't seem to add up and that there had to be some kind of mystery project going on to represent a big chunk of extra expense. A two-point-four billion dollar mystery. Liddell was mum. Discussion:

"The revenues looks good…but your expenses are more than $2.4 billion more than I estimated....There's something really big here. It sounds like you're building a Google or a Yahoo and Ray Ozzie has said this is really expensive. It looks like you're ramping up your online business and the decision is to take the benefits of next year's product cycle to gear up for a battle in the online market," said Rick Sherlund, partner with Goldman Sachs as he tried to suss out what was going on.

SQL server has been a knock-out winner. Xbox 360 has been a wonderful way to burn through cash.

Meanwhile, in the world, Mr. Ballmer goes and describes how everyone needs to fire as many people as Microsoft does (ar-roo? I'd like to see that!) and Intel slaps down a painful reality-check restructuring. I think Mr. Ballmer needs to be taking some advice vs. giving it. I know, I know... get Vista wrapped up and then whip-out the bitter medicine. Even Mr. Johnson is noting that Windows has more people than it needs. If you're in one of the groups that Kevin notes as being part of the redundant overhead (e.g., photos), you know it's time to start looking around before someone starts arranging the chairs and plays the arr-i-eff music.

In other going ons...

(1) Jamie has done it again over at Channel9 with C9Park: Browser Wars. Yes, I laughed pretty hard at Han Scoble but ever more at Princess LisaB.

(2) Mr. Scoble had an interesting post this week... what was it again... oh yes: How Microsoft can shut down Mini-Microsoft. When I first saw the title my mind raced wondering just what the heck kind of break Scoble had been on. Re-education with a head-mounted cage and a hungry rat? Then I read it and appreciated its forward looking optimism.

Yes, please: marginalize me! Nothing would make me happier than to put up the post titled My Work Here is Done. (Well, I guess that could have multiple meanings.) Basically, address the pillars that have become the foundation of this blog and not only can I go back to more date nights with my beloved Buttercup but also we all end up with an efficient Microsoft with well compensated and empowered employees along with delighted, happy shareholders, customers, and partners. Win. Win. Win. Win.

(3) DerekDB, a wonderful Ex-Microsoftie (bad attrition again), has landed a one-two punch with a couple of recent posts. In More Developers != More Features he discusses the mis-middle-management going ons with Longhon / Vista, including this snippet:

Vista isn't neutered and delayed because of any lack of people. It is a mess because of middle management. [...] At least at the time I left (6 months ago), I saw very little evidence that the management of these failed projects was getting any kind of a slap on the wrist. The problem is that in an org that large with that my dependencies, it was impossible to tell which team was actually mismanaged, and which team just was dragged down by the other mismanaged teams.

And while still running hot off of this, Visual Studio (perhaps in some sort of revenge) starts letting loose the grief upon Derek: VisualStudio ...oh my.... I've mentioned woes people have had with VS before (VS2005 specifically). Derek's thoughts here:

What developer wants to waste time with this crap? It is embarrassing (for Microsoft) that I've had such better experiences with Sun's JDK and Eclipse. Sure, VS is faster, but what good is faster, when it doesn't work?

How are the VS service packs coming, anyways? Anyone in VS-land willing to reach-out to Derek and pick him up as a buddy as we fix VS bugs and work towards Orcas? I think you'd have a wonderful time.

312 comments:

Someone on Scoble's blog mentioned Jerry Maguire. I had the exact same thought as I waded though that lengthy brainstorm - actually some pretty good stuff, but possibly little thought at how the powers that be might react to an employee blogger presenting a random checklist of solutions to their difficult problems.

"I'll give him a week", said one of Tom Cruise's coworkers to the another in the movie, as they both stood on their feet cheering. I think Scoble will last longer than that, but now I'm not surprised if he beats Vista out the door.

So you know that earnings must not be on track. Did you get Sir BrianV's mail about budget and how we really aren't freezing all spending in Windows, just all the significant stuff like headcount? I moved everything out of MSFT in my 401K yesterday since I think $27 won't look too bad come Friday morning.

Mr Ballmer, whose personal worth is $14 billion (£7.8 billion) and who seeks to dismiss 6.5 per cent of his global workforce every year, said of the best number of staff to axe: “Whatever you think you can do better with, you should double that.

Middle management has to do a lot of things to justify their existence. Many of those things have to do with encouraging synergy between the groups under their control. And to do that, you have an architect who comes up with a product map.

The problems being:

1) The people doing the product maps don't know enough about the actual customers to come up with a coherent design, but because they are *architects*, you have to follow their design.

2) Groups end up taking dependencies on other groups.

3) Those other groups have their own charters, and end up delivering fewer features later and with reduced quality.

Basically, LH has been a tremendous demonstration of the fact that doing grand designs up front just doesn't work. You end up with big holes because groups couldn't deliver what they thought they could deliver 3 years earlier.

And don't get me started on exec reviews. Why the company thinks that you get better feedback on your software from execs than by showing it to the people who would actually use it is beyond me.

"No stone will remain unturned or unlooked at,” Otellini said at an analyst conference in New York City. “You will see a leaner, more agile and more efficient Intel Corp.”

Intel shares rose more than 2.5 percent after the announcement.============Why does Ballmer want a huge company with 100,000 employees in Redmond? To fuel the future headcount cuts, perhaps. Cut 10% employees after shipping Vista (thanks for the hard work!) - stock goes up 10%. Cut another 20% in 2007 - stock will top $30. Cut 30% more in 2008 - immediate positive feedback from Wall Street.

Also works well from the CFO perspective: the more operational expenses claimed this year, the more opportunities to pad future earnings with little more than cuts.

Mini's vision may come true after all, but we all will be working in WinSE.

From MSFT's 2Q report:-------------------------Microsoft management offers the following guidance for the quarter ending March 31, 2006:

Revenue is expected to be in the range of $10.9 billion to $11.2 billion.($10.9B barely meets the low end)

Operating income is expected to be in the range of $4.5 billion to $4.6 billion.($3.89B not even close)

Diluted earnings per share are expected to be $0.32 or $0.33.(4 cents off. Only 13% miss, no big deal, right Wall Street?)---------------------------

How could we possibly have missed by that much? Are we just hoping for good financial results? All I know is that as a shareholder of this company, my compensation is taking a nice hit today. $25.70 afterhours and still falling?

Well, with the huge miss on earnings and the dire forecast for next year, maybe you will get your wish, Mini. The company is clearly going south and I would guess a lot of employees who were on the fence will finally decide it is time to cut their losses.

To the guy who sold at $27: *Brilliant* move. This one is going to hurt. Wish I were as smart. :(

Mini - I am trying to understand your view on our new head of HR (Princess LisaB as you referred to her). Do you think she is saying, and more importantly doing the right things to turn this around becuase clearly the previous dude was a village idiot even on good days.

You didn't mention where you worked. People working in SF Bay Area have a 15% cost of living adjustment (at least this was the case when I left a few months ago). It used to be 25% in the dot com days.

2. Our CFO denied all allegations of our rising expenses were do be because of a change in employee compensation plan. So we'll be stuck at sub par infalation raise levels for years to come. Thinking about leaving? Try it tommorow cos all those plans from LisaB on pay increases are the pie in the sky that only executives will get to eat this year. MSFT claims to hire the top 90% in the industry, would love to see the compensation hover around that number too.

3. Where are those when we beat numbers in every Q day in and day out.

4. The press seems to be picking up on the fact that employee morale is down. About freakin time! If the company doesnt invest in its employees, I regret to say this but the future for any such company is grim.

5. I sold all my ESPP that I had accomulated over the last 5 years (Yes that's a lot of stock) in extended hours of trading today. Not only did I take a huge loss but have lost all faith in this company now.

How long will Ballmer continue to screw the company? The pain is umbearable. What can we do? I voted him down in every proxy, but he's got clueless mutual fund managers hypnotized.

I'm supposed to be happy being in the only group that shines in this report, but the insanity of the executive management makes me want to jump off the bridge. I wish the next flying chair from Ballmer ricochets off the wall, hits him on the head, and liberates us from his torture (at least for a year).

Most product teams are not focused on making money. We're all spoiled by the Office and Windows cash cows. All we know is spend spend spend! We don't think about making money. I feel that sometimes the goal is to jam as many features in as possible and get lots of press coverage so that GM's/PUM's/VP's can get promoted. If you're lucky, you'll hear about revenue figures. And when was the last time you heard about the actual profit numbers from an all-hands group meeting? btw, because of big operations expenses in running internet services, we can lose money big time if we only look at revenue but not profits.

Everybody was complaining that Microsoft is not taking much risk. Everybody was complaining that Microsoft is not taking directions in emerging areas. Everybody was saying that either Microsoft leave these emerging areas to competitors or show some resolve to win.

Microsoft chooses to win. Microsoft is increasing its investment in these emerging areas. Everybody wanted Microsoft to take advantage of PS3 delay and now Microsoft is doing exactly that. Sure market falls because everybody is not a longterm player. But employees by stock grants are long term player. There is no reason for employees to be unhappy. Except for those who have submitted to the competitors. Microsoft will win by providing better value to consumers!

VS Service pack work (2005 and 2003 - at last) is progressing well, AFAIK. It will even include some useful features and notable performance improvements in many areas. For a change product teams worked on it as opposed to just SE folks.

As for DerekDB, he seems to be mostly complaining about MSDN than about the actual product. MSDN has many problems indeed. Unfortunately, help, setup and such are the places most decent engineers don't want to work in...

"Microsoft chooses to win. Microsoft is increasing its investment in these emerging areas. Everybody wanted Microsoft to take advantage of PS3 delay and now Microsoft is doing exactly that. Sure market falls because everybody is not a longterm player. But employees by stock grants are long term player."

Perhaps you'll recall that all those massive "investments" over the past 5+ yrs in MSN, Xbox, MBS, headcount, compensation, etc. were also meant to drive LT growth and success? Instead, they simply impaired earnings and have resulted in profitless revenue growth and a stock that has underperformed every major index since 2002. Now, without any forwarning, MS drops a bombshell on shareholders and the street that any future benefit from Vista and Office will be "reinvested" to drive future success? Look, you can fool some people some of the time but every one has seen this movie before. The street knows that future MS bets aren't any more likely to pay off than previous MS bets. As such, they see a 13% decrease in next year's expected earnings and are selling the stock off that much to compensate for it. Ballmer should take that new found regard for firing people and use it on himself - trailing the market badly for 4+ years? Are you kidding me? There isn't another large cap CEO in existence with that kind of track record who still has a job.

We hired a CFO from a company specializing in chopping trees and a COO from a company specializing in hiring illegal immigrant workers to clean its warehouses (and kept them locked in). Does this sound like what a growth-oriented company would have done?

As of 9:59 CDT, MSFT is at 24.266--down 10.95%. Seeing the chart close yesterday above 27 and open today below 25 would be rather sobering if you were using MSFT stock for investing or retiring purposes.

On the bright side, if there are any partners trying to cash out of their 1 million dollar payday, it will only give them 900k now, and it will probably be less as the day continues.

Over the last 5+ years, Microsoft have been pouring Billions into VISTA and OFFICE and as we can see so far... it is doing such a wonderful job. So yes Microsoft should continue to pour Billions more into other projects because all you need is to pour money into stuff and watch it grow.

Wow, in just one day (acutally a few hours) MS lost $3/share or 11% market cap

To all Microsofties "hoping" the stock will go up - bad news. Yesterday's earnings "suprise" was not a suprise at all.

I used to work for John Connors on project Efficacy (pull $1B out of MS cost structure). This was about two years ago and even then we realized that the future value of the stock was headed one way - DOWN.

The only way it can go up is if MS develops a new business that earns Windows/Office like revenues (possible) AND profit (highly unlikely). The entire valuation of the company is based on those two cash cows. To the extent new businesses start becoming a larger and larger part of MS's overall revenue (which they are), the valuation of the company will continue to fall because each incremental $ of revenue is less valuable than the previous to the bottom line.

So ask yourself these key questions as you sip the coolaid:

- What is the probability MS can come up with a new business that has Windows/Office like revenue AND profitability?

- And even if it does find such a business, what is the probability the government would let MS move forward with it, given the company's monopoly status?

If you can't honestly answer yes to both the above, then don't be suprised by a stock price half (gasp!) of what it is today.

While Microsoft's annual attrition rate rose one percentage point from fiscal 2003 to 2004, it's still just 9%, a bit lower than the industry average. Microsoft says it receives 45,000 to 60,000 job applications a month, and over 90% of the people offered jobs accept.

If Mini wants to shrink the company, all he has to do is convince people not to apply to Microsoft.

Considering how many applications they get every year, that will take some time.

> But employees by stock grants are long term player. There is no reason for employees to be unhappy.

Err what are you smoking, the average L65 is getting for a fully loaded Stock Award vesting schedule (which is still 1 year away) a whopping $18k after tax a year. This is a very senior employee in the company. Would you sacrefice your family and personal life, taking on a load of stress, working anything but a 40/hr week. I've been here since 1991 when I did work an 70+ hour week, I busted my behind knowing I'd get serious reward in a few years time. I've continued to bust my behind, since 2000 we've been spoonfed by the loser CFO beancounters that have come and gone (taking nice $20m leaving bonuses with them) plus the spouting Ballmer, 'Shareholder value, Shareholder value, Shareholder value', 'We will conquer the world', 'I love this company'. Other than what now is a '10%' ESPP discount, thats been my only life-sacreficing reward. Then we had the beligerant Gates when he took the stand thinking he was invinciple in court and we got slammed a 14% MSFT ding the day we were ruled a monopoly. Yes I was lucky joining in the early 90's, but now I'm looking at my reports who bust their behind for a mere 2% merit increase and, (oohhh exciting) few hundred stock awards if they're lucky.

If MSFT invested big-time in their employee's who 'pull it off', we'd be a very different company, Vista would have shipped, we'd be further along in the internet, our business wouldn't just be playing catchup to the rest, we'd actually invent some products within the company - not a $500m/yr business, sorry no funding. I know of several PUMs who have left the company with brilliant ideas because the bean counters and risk averters were in the way. Think small, not serveral hundred -> thousand person product groups, but small tight teams of < 100 - get a clue they work. Think significant performance based bonuses based on level, influence, and ship criteria, eg: You get $500k vested over 5 years if you ship XX by July of XX. I'd certainly bust my behind for that and make it ship, high quality, out manoever the competition. This 'would' be shareholder value, investing siginificantly in the people who are the company, yes it would be a 'big' investment, but then we'd be big deliverers, and the market would view us so, rather than a squabbling, overly managed burocracy. What is not shareholder value are the $100k-$400k/yr bonuses, let along the outrageous stock grants the fat cats are getting for delaying Vista, muddles strategies etc.

I'm a 15 year vet, have Microsoft running through my blood, but now given the last days events are seriously disillusioned, we were pumped up at the last company meeting, no one mentioned anything about MAJOR potholes in the road, 'Vista 'IS' shipping on time' we were told, 'Shareholders will love us'... I'm tired of the pulling the wool over our eyes and fumbling at this point and look forward to a nice relaxing weekend with my family.

Big money is finally throwing in the towel. 400M+ volume so far today - almost double any day over the past 5 years - and the day's not done. Way to go Steve - great job. BTW, make sure to dole out lots of performance bonuses to all the snr VPs who've contributed to the abysmal performance of the company and especially the stock over the past 3 yrs. Be proud.

Anonymous Partner, if you have enough personal ethics to walk away from that million dollars, I salute you.

About mutual fund managers: This may be enough for some of them to wake up and see that there are problems. In fact, the big price drop is probably a big sell-off caused by exactly that.

About a year ago, I was working for a company that was going through a merger. The announcement of the merger caused the stock price to tank. When we were on the verge of getting SEC approval for the merger to actually happen, I asked if that would also cause the stock to go down. I was told that no, it would not, because everybody who still owned the stock was on board with the idea of the merger.

Applying this idea to Microsoft's stock, it seems that the call for reform will never come from the stockholders, except in the form of a massive selloff, because those who own the stock at any given time are comfortable with the current direction and management - otherwise, they'd get out of the stock.

So, if the only way the stockholders can get management's attention is through a selloff, how bad does the price have to get before Gates and Ballmer are forced to admit that they've blown it? I'm afraid that that's a long way further down.

Sorry to add more depression at an already depressing time, but that's what it looks like to me...

I'm sorry, but as an investor I have to say it - MSFT sucks, and all of us who own this stock are idiots.

I left the company almost a year ago and have been waiting for an upswing to dump all the shares I'd accumulated over the years. "Just wait until next quarter," I'd tell myself. "It'll hit 29 or 30 soon."

No more. MSFT is a giant bonfire that turns money into smoke and hot air. I don't care how low the stock goes today - I'm dumping it. I will never buy another share of MSFT until Ballmer resigns as CEO.

P.S. On the bright side, at least my decision to hold onto GOOG through the turbulence has paid off.

I know I don't understand the financial market. But every time the news hits the media about some company's results not meeting expectations, I wonder why nobody ever shouts for the heads of the analysts whose expectations were wrong...

Seriously, this move is the anti-Mini. You guys are going to staff up like crazy to build Moogle (Microsoft's inferior copy of Google).

Good luck on that. I took Mini's advice and jumped ship, and my large and prominent software company is having an EXCRUCIATING time filling vacancies. It's not "we don't have the money to fill this job we need", but "we don't have the candidates".

The last thing anybody needs to do at Microsoft is come up with a new strategy. The strategy of just making good products that people want is too simple--nobody's going to get millions of stock options for coming up with that one. Every time anybody comes up with a strategy it has to be more grandiose and result in an even more colossal failure than the last one.

I sold ALL my owned stock, ESPP and 401k managed as well as exercised and sold all my options back in March when it went just a hair over 28. I also left the company (RIF'd)with a nice parting gift of a severance package. Funny thing is, I was about to quit anyway.

Now I'm back as a vendor, making more than I was as an FTE indentured slave and I don't have to work such insane hours in an org full of BOSSes (not a leader amongst them) who are well known for trying to ferret out those who made less than glowing comments on the mgr feedback forms or the useless Polls.

Domestically, that org now has more leads, mgrs and PMs than SDE/SDET's (by a wide margin) The actual work was both off-shored and outsourced. Any guesses as to productivity or quality?

BrianV, you are being LIED to by your middle-mgmt underlings, and the info you have to base decisions on has as much value as broken skate laces. Do something about it.

To the Visual Studio point, let me just add a couple of things. First, most established product groups at Microsoft don't take big risks, and when they do, they don't ever ship.

Visual Studio took two huge bets with Express and Team System. Express gets us a chance to win back the youngin's, who are starting off with Linux and PHP when, back in the day, they'd start off on MS. With Team System, MS enters a multi-billion dollar lifecycle tools industry with a great product that has received kudos from customers everywhere.

Quality issues aside (and I think many of the quality issues are exacerbated by an era of blogs where every bug gets equal importance, whether it deserve a spotlight or not), the Visual Studio team flat out executed. And for those folks who want to say Whidbey was late, it was: by about 6 months.

I weighed in on the MS Poll. Gets worse every year and I still have some room at the bottom for next year, but not much. They need to put in a quick-click "All 'Strongly Disagrees'" soon to boost our productivity. Add some of the most common comments as drop-downs and we're in business.

This company is not a stunt plane. It's a triple-decker 100,000 passenger job that can only do two things: slowly spiral downward, dumping fuel the whole way, until someday it hits the ground -or- ease back ever so gently on the stick and climb. Too many people are looking for the stunt plane maneuvers - either way: into a fantastic crash or awe-inspiring looping climb on top. Forget. This is going to be boring and that is almost the worst part of it. I'd love to see a struggling company try to do something extreme to turn itself around and if they failed, at least they tried and got it over quick.

Microsoft leadership doesn't have the guts to pull back on the stick and HR doesn't even know how to fly. I don't see us doing anything to slowly ease out of descent and into a climb and I doubt I can wait around to see that happen if and when it does.

Over $3.00 out of the stock price today. ALL on Ballmer's watch. WHERE IS THE ACCOUNTABILITY????? We refuse to talk about where the investments are going? We are cagey about what businesses we are beefing up? So when we do finally announce something are we going to bother to restate our Q3 earnings? I can't believe how utterly screwed up this is. Ballmer wants to leave some sort of legacy and that's why he won't leave. Well, the legacy is coming, worst performing stock on the Dow (almost)...that's a great legacy. TIME TO LEAVE STEVE...please just resign and maybe the market will give us back some of our market cap.

This earnings debacle is no surprise at all. Aside from playing catch up with Mr. Jobs and Largey and unable to ship Vista (or “Shit It”), this bloated pig can't even stand up anymore. What once was once a great passionate company full of bright individuals is now an unhealthy complex of caverns inhabited by a mash up of sub par performers afraid of losing their most excellent benefits, excellent employees who have lost their confidence by being cycled in this system and never getting anything finished, and process touting managers milking this cash cow for all its worth (yeah you when you get up and piss at 3AM go ahead and send that token email so everyone thinks you are such a hard worker). Finally there are those who have just settled in for the long ride down cause the paycheck is there and you don't have to work for it anyhow. Accountability is a word unknown in these hallowed halls...

This company does have some of the best minds but just not enough. The dunces outweigh them now. Scoble said on his blog that even the worst Microsoft employee is better than most at other companies. What a load of guano. This company sure is in a unique position to do amazing things but I fear MS is much like the half assed relative of a great artist or leader - we have the name and the looks yes - but we just don't have the brains to live up to expectations. See you at the bottom. Or should I say bottoms up? I was in the pub at noon today finishing up my monthly status report.

Microsoft is clueless. This big bet, taking on Google, is going to be the end of Microsoft.

Its not just about the data centers and connectivity. There is a huge software, control, and management aspect to a distributed system of this scale. Shoot, you guys can't even build a desktop OS. How the heck are you going to build a massivley distributed cluster and associated control system?

A google engineer can literally sit in his office and decide on a whim to run a job on 10,000 nodes, some in australia, some in california, some in germany, etc. With the push of a button his software is deployed, the job is dynamically dispatched, results collected, he can monitor every aspect of this job from a control monitor running anywhere on their network.

So Microsoft is going to embark on a war that matches this aspect of Google? Thats what the 2.4b additional research spend is going to do? You can't buy expertise like this. You can buy computers and networks, but you can't buy the ability to reliably control a massive network. For this, you need to write a ton of software. I am amazed that after the Vista clusterf*&$%ck, Microsoft still thinks it can pull off big bets like this.

But then again, maybe all those overpaid architect dudes can just design the solution in powerpoint and visio, you can run their slides through the powerpoint compiler, and out will pop your system.

Shoot, I forgot, you have Brad Lovering, John Shewchuck, David Vaskevitch, Brian Valentine, Peter Spiro, Bill "Chief Software Architect" Gates, Ray Ozzie, etc. all working on your side. I am sure these guys alone can come in an save the day, show you how to write a little cmd.exe script, OR WAIT, I forget, you have the mystical magical "Power Shell". Anyway, yeah, write a little script that squirts a little .NET all over the globe and sure enough, you will have services running on 100's of thousands of machines, presto chango!

Good luck. This is going to be fun watching you burn through the rest of your cash and credibility.

The answer is pretty obvious. A PM, a Dev and a tester for every feature? Fire two of them from every team. At least do that on average. If a dev says he needs a PM or a tester fire him. If a PM says he needs someone else to code up the feature fire him. Keep testers who have the potential to replace a PM and a Dev. What kind of insane organization uses three people where one person with a brain will do?

Logged in to find a huge piece of Ballmer blather about the "next wave" or whatever in my inbox. Can't wait to hear you all rip that apart. I've heard all this before since 2000, how we're positioned to cure cancer, land on Mars, and achieve world peace. Actually, I think we've a better chance of achieving those than stock growth anytime soon.

Does anyone know if we can find out if there was a huge swell of executive stock sales in the first half of the week?

"The reaction to yesterday’s news is a lesson that the entire leadership team at Microsoft will learn from."

I'm so glad that we shareholders could assist Steve and the rest of the management team with their personal growth/development and all for the amazingly cheap price of just $32B - or the entire pathetic gain over the past 3 years. Is the guy for real? Are he and the rest of the mgt team really so incredibly ignorant/clueless to think they could blindside investors/the street/analysts by hijacking the entire long-awaited FY07 upside from Office and Vista w/o incurring a massive negative reaction? WTF does he think was keeping any kind of floor under this stock if not the promise of that earnings upside?

"Over the last five years, Microsoft has seen remarkable growth. In FY01, we were a $25 billion company with $12 billion in operating profits. Last year, we hit $40 billion, with $19 billion in operating profits. Our record revenue numbers for this quarter and this fiscal year continue this pattern of strong growth, and we expect to finish FY06 at about $44 billion, a jump of 11 percent over last year."

And how's all that growth translated against your core mandate of increasing shareholder value Steve? Oh right, you and your team have managed to destroy more shareholder value than was lost in both Enron and Worldcom combined, massively underperformed all major indexes for 3+ years (yesterday's announcement will almost surely guarantee at least another one), and are the 6th worst performer in the DOW 30 since 1998 (no doubt you moved up a spot or two more after today's impressive performance). Despite this abysmal record of underperformance, I bet that come August, virtually every senior VP will be maxing out on their bonuses for the past 3 years. What is wrong with that picture Steve? Face it: your reign as CEO has been an unmitigated failure. In addition to overseeing the destruction of more than $300B in shareholder value, your tenure has seen MS miss every major new profitable opportunity (search, music, services) while investing massive amounts of capital is totally suspect and still unprofitable ventures (i.e. Xbox). Worse, headcount and bureaucracy have mushroomed resulting in a company that is openly laughed at by competitors as being slow and weak. You, Gates and the rest of the [largely underperforming] leadership team need to go before the damage you've collectively inflicted becomes irreparable.

I have always wondered if the people who post here are really telling the truth. Well, I am now...

I am seriously thinking about leaving this company. I have often toggled between leaving and staying but this is it. The stock is going nowhere, Vista was/is a diaster of Titanic proportions, no salary hikes this year(from what has been leaked so far), red tape etc etc. The list goes on and on (and in DMD it just gets worse,if you know what I mean). This is it for me. I have been here for 5 years now and now I have finally decided to say goodbye.

I wonder (and fear) what the world outside is like. I have never worked for any other company. But now the time has come. Here is to a brave new world...wish me luck everyone!

While Microsoft's annual attrition rate rose one percentage point from fiscal 2003 to 2004, it's still just 9%, a bit lower than the industry average. Microsoft says it receives 45,000 to 60,000 job applications a month, and over 90% of the people offered jobs accept

>Microsoft HR has taken care of the resume problem without Mini's help. They ask hiring managers to go to monster.com as our internal databases dont work.

Microsoft is clueless. This big bet, taking on Google, is going to be the end of Microsoft.

Its not just about the data centers and connectivity. There is a huge software, control, and management aspect to a distributed system of this scale. Shoot, you guys can't even build a desktop OS. How the heck are you going to build a massivley distributed cluster and associated control system?

Yes because Google is staffed by super brains, they have 5000 PhDs, they done bought all the IQ. The massive collective intelligence at the Googleplex has unleashed upon the world...

A) A search that is largely irrelevant (not that MS Search is any better mind you) since 8 out of the top 10 search results for any given query are either duplicates, SEO sites, landing pages or seemingly unrelated in any meaningful way to what you entered in the search box

B) Google Earth, a brilliant money making monster harnessing the cutting edge (5 year old) Keyhole technology with a tiny bit of shine on it.

C) GMail, the perpetual beta (what isn't) mail platform that doesn't offer much value over any other mail platform as I see it.

D) An online calendar app. Finally I can share with the world my plans to get drunk and do ungodly acts with a hooker next Easter.

E) Sketchup, another sure fire money maker in the Google family. If you have always longed to have a crappy CAD imitator that was free wait no longer.

This said I still do think the fanatical (personal) obsession that Ballmer and Gates seem to have with "beating Google" is ridiculous since apart from their AdSense business I haven't see one viable, profit producing thing from them. Let them beat themselves by crashing hard when people realize most all of their revenue is based on advertising, and we all know how much everyone loves advertising and continuously wants more. Even AdSense is becoming irrelevant as web newbies learn to distinguish the ads from the search results. I personally use Google search almost instinctively (I pine for the days it didn't blow) mostly because all the other search engines suck just as bad and there is no compelling reason to retrain my brain. That said, never in my years of using Google have I EVER clicked on a sponsored link, ever. Microsoft needs to cut 80% of the upper management fiasco that has been responsible for the last n years of failures and start finding people that take responsibility, understand the difference between an innovation and a trivial feature and understand we need to really focus on our PAYING customers and what they need/want not on personal vendettas/dreams of management (although to call them that is not even close to accurate)

To all the unhappy employees. You should be happier. I am happy today. My wish come true. I sent the question to Steve's town square type meeting, that why Microsoft is not making big bets. We may lose or win if we make bets and we definitely lose if we do not. Hail Steve.

To investors: Why do you invest in a stock? If you prefer a company to keep money in a safe then you do not need to buy stocks. You could simply buy a safe.

I buy stocks because for me that's a bet I am making for our economic future. Superior wins and inferior lose. On an average investors win.

Microsoft's record of making bit bet is not great but it is not bad either. The future will tell whether the return on investment on extra 2 billion dollars is going to be negative or positive but its probablistic expected value is positive. The worst case is that this investment will turn out to be a waste. But that's the scenario stock market has assumed today. MSFT value is punished as if Microsoft will spend $2 billion without getting anything, not even a dollar, back from it.

Investors you buy stock because you want to bet on a capitalist's economic future, which sure USA is. Your stock is a proxy of this bet. The company is a proxy to manage your investement. If you want the company does not make bet and return you money market return then you better invest in a money market account. Because that will pay you 4% whereas in MSFT after the cost of managing your investment safely, you get only 2% dividend.

Go Bill and Steve. Make an investment. Win customers by providing better value. I can't say for other employees but I am with you in trying to make customers happy at another front. May be it is web services or may be it is digital entertainment.

SteveB, you got to be kidding, or you'd better check yourself into mental hospital. After a single day loss of $32B market cap, all you got to admint in a 2,000-word memo to the employees is "The reaction to yesterday’s news is a lesson that the entire leadership team at Microsoft will learn from." And the rest is just BS like "strong growth", "tremendous opportunities," blah blah blah ...

C'mon, do yourself a favor -- apologize to the shareholders and employees, and resign gracefully. Oh, btw don't forget to pack your dictatorship style and monkey boy dance on the way out -- we've seen enuf and it's disgusting.

Why can't Microsoft FOCUS on the simple WINDOWS and OFFICE line and all the supporting products built around those two things? Forget all these stupid freaking MOOGLE WANABE PROJECTS OF DOOM. BALMER'S A TURD. DEVELOPERS DEVELOPERS DEVELOPERS! Gee Steve why not let them develop some SOFTWARE SOFTWARE SOFTWARE.

I worked for MS for more than a decade(between 10 and 15 years to keep HR guessing). The ship is now sinking. Mgmt is just clueless. Most of them have no idea of what's happening outside Redmond and are in denial. You know what? I resigned(in the past 30 days) and I'm glad I did.

Yes because Google is staffed by super brains, they have 5000 PhDs, they done bought all the IQ. The massive collective intelligence at the Googleplex has unleashed upon the world...

Intersting statement, MSR (as in Microsoft Research) has about 600 PhDs (a very high percentage are worldwide leaders in their fields) which are contributing to every product line we have, (sure quite a few very cool innovations (yes MS can innovate too) get cut because of the typical product group feature cut procedure, despite them actually offering something over the bland new feature set) yet many people are questioning the value of MSR other than a fancy show at Techfest.

Some of the beautiful fumbles MS has made: MSR did TerraServer (aka Virtual Earth) 4 years before Google Maps.. but of course we're way behind and come out with Virtual Earth after Google Maps.

MSR did desktop search again 4 years before Google Desktop Search but nobody was interested when MSR was peddaling it. Strangely MSN Desktop Search comes out after Google releases.

This is but the tip of the iceberg, why bother continuing.

Gotta love catching up to every innovation in the industry because everyone is so damm conservative and risk averse in this company.

Perhaps we should get rid of all the brains at Microsoft and replace them with a few hundred more Windows division personnel to work on Vista+1 ??

"Microsoft chooses to win. Microsoft is increasing its investment in these emerging areas. Everybody wanted Microsoft to take advantage of PS3 delay and now Microsoft is doing exactly that."

Funny that. I would have thought that by jumping into a market half-assed, and spreading itself thin, Microsoft was doing the very opposite.

Vista's going to be half-assed; Office betas are being slammed for its new interface since so many people will need quite a bit of training to get up to speed with it; and Microsoft is digging its own grave with its teeth, diversifying for the sake of diversifying.

When Novell was getting creamed by Microsoft in the mid-nineties people said it should stick to its knitting, networking and network management etc, rather than jumping into Office suites with the WordPerfect purchase, and Unix with the AT&T USL purchase, etc.

First, we call our customers dinasours,then Ballmer starts shouting that we're going to push as much "Advertising, advertising, advertising" (http://www.theworkplaceblog.com/2006/03/steve_ballmer_on_advertising_v.html) as we can at them.

Shoving crap down the throats of extinct reptiles isn't what I signed on for.

anonymous wrote "Quality issues aside (and I think many of the quality issues are exacerbated by an era of blogs where every bug gets equal importance, whether it deserve a spotlight or not), the Visual Studio team flat out executed. And for those folks who want to say Whidbey was late, it was: by about 6 months.

Ask SQL and Windows if they would take a 6 month slip."

The problem with MSFT is everyone thinks their crap doesn't stink. Whidbey was 2 years late. I remember calendars being handed out when I joined in 2002 with caricatures of .NET celebrities like Don Box and Anders which had Whidbey shipping in late 2003.

I find it sad that people like to attack other teams at Microsoft instead of looking inward at their own problems. Ironically, such people tend to come from the teams that have the deepest fundamental problems.

another anonymous wrote "Even AdSense is becoming irrelevant as web newbies learn to distinguish the ads from the search results. I personally use Google search almost instinctively (I pine for the days it didn't blow) mostly because all the other search engines suck just as bad and there is no compelling reason to retrain my brain. That said, never in my years of using Google have I EVER clicked on a sponsored link, ever."

That sounds like faulty reasoning. In college I had friends that never paid for software like Windows and Office, this doesn't mean that they aren't valuable multi-billion dollar businesses.

Extrapolating the value of a business based on one person's anecdotal experience sounds like faulty reasoning to me.

Anonymous Partner, if you have enough personal ethics to walk away from that million dollars, I salute you.

I am not the poster of this one, but I was in the same boat. I am now an ex-partner at Microsoft. I walked away from 750,000 in the money options. I also walked away from 125,000 SPSA grants that would have started paying off this august. During the stock buyback, I sold back over 1.2m shares, received 1/3rd of my payment and walked away from the 2/3.

Mr. Ballmer and Mr. Gates have surrounded themselves with yes-men that have no idea how to execute on their grand visions. They are absolutely destroying this company and I wanted no part of it any more.

I wish you all luck. You partners that are hanging out till your August payday are a disgrace! If Mr. Ballmer had any balls, he would set your SPSA multiplier to 1% and screw you all. The company has missed all reasonable expectations of targets these past three years. To claim otherwise is a crime! So, do I think a crime will be committed this August? You bet! I know for fact that Microsoft is going to claim to have met the SPSA target metrics and will reward the partners with 100% allocations. Those of you on the inside can check for yourselves...

9% of employees leave every year. This is lower than the industry average.

I'm a Group Mgr and unfortunately, one of my 4.5/4.0 devs left the company for a startup and I am having problems just finding good dev applicants. I would rather a PMs leave as it is much easier to replace them. Seems like the stars are making up a lot of the 9% so using industry average as saying we are doing better is not really that appropriate.

MSR did desktop search again 4 years before Google Desktop Search but nobody was interested when MSR was peddaling it. Strangely MSN Desktop Search comes out after Google releases.

I used the so-called MSR version (stuff ive seen) and it was a joke! Whenever I turn on my laptop, my CPU would spiked to 100%, I had several GB of logging files on my drive, UI looked like it came from the 80's. Now they are taking credit for MSN's desktop search - Give me a break... No wonder the prod groups didn't give you guys the time of day. The breakthrough only came after we bought Lookout from a couple of former Netscape guys working from their garage and who do not have PhDs and who knew what the public wants and delivered.

Its not just about the data centers and connectivity. There is a huge software, control, and management aspect to a distributed system of this scale. Shoot, you guys can't even build a desktop OS. How the heck are you going to build a massivley distributed cluster and associated control system?

Here is an article telling essentiall the same story: For More Insight...

I know this is coming from a Google oriented newsletter, but there is much truth to these comments. Try to be open and honest as you read these. Managing and running mass scale geo distributed clusters is a big deal. Google has been in this game for years. Rumors say they have 250,000+ servers running in data centers all over the globe and that they have bought up a significant amount of the "dark fiber" laid down during the telcom meltdown.

Microsoft has a ton of $$. There is no doubt about that, BUT this war can not be won with just $$. You need talent and an ability to execute and build out the rest of the control and management stack. This is something that Google has focused on over the years. I understand that they are on their third generation of cluster control software. Note also that this is just the basics.

Assuming Microsoft does manage to build out a $2.4b cluster and getting it operating efficiently in the next 3-5 years. What exactly are you going to run on it to recoup that $2.4b investment? You think Google, Ebay, Amazon, etc. are just going to stand still and wait for you to get in the game so that you can have a fair race? Get real!

There is absolutely NOTHING in your Windows Live stack thats rule changing, and absolutely NOTHING in that initiative that will garuntee that you recoup your massive investment in internet infrastructure.

I see this folly into mass scale data center buildout as a huge waste of shareholder value that will never earn back a dime and will be a long term drain on your balance sheet. I sure hope I am wrong because I know how you guys work. David and Ray will whisper in Bill and Steve's ears that this thing is gonna be big. Steve will write the check, and the rest of you will thrash around stabbing each other in the back hoping to get credit for doing something cool.

I agree with MSR comment. MSR people roughly are at two levels higher with another person in a company with PhD and the same level of experience. Of course, compare to Masters and Bachelors the difference is at least three or four levels.

These level differences mean that an MSR employee is paid on average 1.5 to 2 times compensation than others. Is it a good investment? MSR does not seem to be helping Microsoft to win.

The answer is "yes". MSR is a good investment in itself. The problem is that MSR is not enabled. MSR generates many industry leading ideas quite regularly. Many of them years ahead. Why do not these ideas picked up by the company? I would not blame on anybody to avoid the flame war here, but one of three major job disciplines seems to be a big wall. The folks in this discipline have some kind of superiority complex. The process goes something like this. A MSR person email a responsible person in product group with an idea. Gets an half enthusiastic response. Well after pushing gives time to meet the folks at MSR. Typically 2-3 MSR folks go to the person's building to discuss the idea. Only thing the person gives is this one hour. And then invariably the output of the discussion is. Look MSR folks you do not know anything about the real life customers. You folks have not thought about this. You folks, you think customer would understand this altogether new feature. And what's about the code. This prototype is no good for a product launch. The product person, does not realize that if the feature is a big value addition then it is his job to figure out how to present the feature to a customer. It is his job to create a product quality code. MSR people do not have expertese in writing product quality code. They write code to convince you that the idea is cool and feasible.

MSR holds techfest so that somebody could pick up an idea. There was a beautiful calendering demo, there was beautiful map-creation demo.

MSR value comes in spike. Each spike is capable of paying MSR budget for many years. Company's inability to cash on these spike is not MSR's fault. MSR folks, more than money, want recognition, which can only come after the successful launch of the idea. It could be a big win if the recognition comes from within. What's happening now is as follows.

MSR folks write a think-week paper. If BillG is absolutely thrilled then the paper is emailed to all the relevant people in the company. But that's it. BillG is ignored. Nobody follows up on that. Nobody understand that BillG is the founder of the company and if he is thrilled with something then that must at least be explored. It must be made compulsary that if BillG is thrilled with something then that must be completely explored.

If MSR is so much ignored then why the smartest of the talent join MSR. One answer. MSR gives the academic freedom which is more than a professor could have in a big named university. MSR people are free to talk about their ideas. Some of them are picked by competitors or independently discovered again after all the clues were there. Then the only thing MSR folks get is the bragging right. Terraserver pre-dates Google Earth by 5 years. I want company to do one of the following two things.

1. Disbandle MSR and fire all the MSR people on the spot.

2. Fire any product group VP or GM, when an idea was discovered at MSR years ago, implemented by a competitor now and not recognized by the corresponding VP here.

Right now the only value company extracts from MSR is a low level consultancy value. Typically folks from product group come to MSR for their small problems. Luckily this process is quite fine. The other way has frictions.

Somebody wrote:"I used the so-called MSR version (stuff ive seen) and it was a joke! Whenever I turn on my laptop, my CPU would spiked to 100%, I had several GB of logging files on my drive, UI looked like it came from the 80's."

You do realize that it was not coded as a product. The UI was not designed for a product. It was a prototype. It was the idea there which had value. The idea is only a lead to a product. A lot of work remains after that. Sure Microsoft had a lot of resources to take the lead at that time and could have created a product of this century. Do not see MSR as a product machine but see it as a idea machine.

Man. Get a life. Desktop search was in Windows NT 4. Microsoft was doing file search long time before Google kids begged for money to start company.

Something that Microsoft was unable to do - teach people how to use and improve it's features.

The biggest problem with Microsoft that management does not see there money come from. Google can see every click on their ads or any other service and can focus on profitable features. In constract Microsoft will see only box shipments and will have no any idea on that features users realy use.

I worked in the MSSearch team when MSR was working on this, the 100% CPU issues were from MSSearch.exe itself, the MSR prototype team knew exactly where the issues were in our code but we didn't beleive them that the problem was with us. It was designed for the server where eating 100% whenever we wished was fine, but theywere using it on the desktop and at the time we didn't see any value in it. Seems like us product groups are too self-important to think we have any issues orwe could do anything better. It took us a few hours of work to address this, but we only did this when MSN came to us and said fix it and that was as the other person said, years later. MSN Search is infact based entirely from Stuff I've Seen.

General Electric has made a virtue of dismissing 10 per cent of its management each year to keep executives on their toes but has refrained from advocating it as a general policy.

Mr Ballmer has moved a step further by championing it as a business goal for all. He said that when he joined Bill Gates at Microsoft 26 years ago there were only 30 employees, but that “most of them weren’t very good”.

This is laughable.

The reason we hired Ballmer in the first place was to be a good ‘suit’ guy, and one who could bellow out loud and coerce and push people into doing stuff. (He was pretty good at that. In fact, he developed what we called the ‘dancing bear routine’ where he used to jump up and down, wave his arms around and roar at the top of his lungs. That is until he blew out his vocal chords and had to have them surgically repaired.)

When the DOJ came calling, Bill adroitly moved out of the way and put Ballmer into their path. Today, (no kidding) we’re being led by a CEO who is not a CEO and a Senior Software Architect who is not a Senior Software Architect. Google is not Netscape. We are not going to be able to size them up, figure out where to stick the swords, and then watch them fall. Something has to be done, and probably tons of money has to be spent doing it, but its looking more and more every day like Google is shaping up to be Microsoft’s waterloo.

The compound effect of an industry aching to retaliate for year’s of monopoly abuse, the fact that we have no credible leadership at the leadership position, and the fact that the leadership we do have is asking us to carve each other up at review time is a lot to bear. I’ve heard a lot of people saying we need to clean house top down – at this point I totally agree with them.

Sigh - I hate seeing this kind of quote ring true, but I can't say that the results make me regret leaving:

http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041012_4018_db083.htm "So a different group of people start to move up. And who usually ends up running the show? The sales guy. John Akers at IBM (IBM ) is the consummate example. Then one day, the monopoly expires for whatever reason. But by then the best product people have left, or they're no longer listened to. And so the company goes through this tumultuous time, and it either survives or it doesn't.

Q: Is this common in the industry?A: Look at Microsoft (MSFT ) -- who's running Microsoft?

MSR is a great org with most excellent and talented people. It is a great asset to Microsoft in general and the product groups in particular. It is also a place where you can see a VP that is worthy of leading such a pool of talent.

Only an idiot would expect a prototype to have production quality code. It is a proof of concept and a starting point --not a final commercial product. In addition calling for the elimination of MSR or the firing of any decision maker who decides not to productize a technology which may later be developed by a competitor is less than idiotic and shows complete lack of understanding of both business and product development.

I have the highest respect for MSR researchers and would like to note that customers and customer needs are not an unknown to them. Just read some of the papers coming out of MSR to see what a great lot of focused people we have there. While some research projects are theoretical, several are focused on market needs. That’s the nature of research e.g. how many pharmaceutical drugs actually make it to market.

Save the bashing for incompetence, greed and mediocrity. Don’t turn the mini blog into mindless, humorless rants that do nothing to advance the goal of making Microsoft a better place.

wow. after the 2.0-sub par exec performance on earning concall, and the drastic reduction in our net wealth, me and 7 colleagues-(including mgt) decided to take the day off and go to the movies.. our give a damn-has blue screened, we are having a harder time every year taking care of our families, w/4.0 - 2% raises while more work has been piled on.

cooked , with this company who doesnt take care of their own. I'll be starting a new gig in a few weeks, and feel pretty damn good about it!

at this pace-the culture and the threaded apathy throughout the company, msft will likely be the novell or gm of the next decade. largely irrelevant

"Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people you have, how you're led, and how much you get it."-- Steve Jobs Fortune, Nov. 9, 1998

If I hear one more thing about innovation, making big bets, or going to war with Google, I'm going to barf.

Microsoft has fallen into the trap of thinking its products are "done"--that the OS is done, that the web browser is done, that the calendar program is done, etc. And we're finding out over and over from our competition that there IS room for improvement and there IS customer interest in better products, even for something as simple as a calendar.

Apple can charge $100 for an OS update and people are happy to pay it because each update contains tangible improvements. If Microsoft can escape from this "done" mentality and produce honest product upgrades (instead of redesigns and feature churn), it would make more revenue from that alone than Amazon and Google combined.

Screw all this "Web 2.0" ad revenue nonsense. This started back with Netscape and it's still going. Yeah, we won the browser war. What did that get us? A bunch of trouble from the DOJ, ill will from the public, and security flaws in the OS. Let Google have their $6B in semi-fradulent ad revenue and concentrate on making some real money by selling good products.

I worked in MSR for 4 years and then left and worked in a Microsoft product group for 5 years. Both have great people (not talking about myself here), but unfortunately having great people alone is not enough. Both sides are put in an uncomortable positions and the management is known not to lift a finger. In MSR your review is determined by publication or contributions to product groups. You can waste your life trying to get product group PMs with technology transfer. The best technologuy transfer I have seen is people doing it themself, getting in the code and adding that research idea, but you pay dearly for that because it takes too long and PMs shoot it down. On the product side there is no incentive to consult with MSR and miss you milestone and screw up your review.

Techfest is a big farce, more like an egofest from MSR management and senior researchers.

I think they should split MSR into multiple units and make them report to respective product group VPs and then MS will have a better chance to compete.

Mini, I've got to thank you. I work for one of the game studios that MS bought (for a lot of money!) to create exclusives for the Xbox platform. I was considering to move inside MS to escape the chaos that our studio is in currently, but reading these stories I don't think I need to bother.Oh, and I have seen absolutely nothing coming out of MS-Poll.

List of criminal actions undertaken by Ballmer to destroy this company:

1. Removing any incentive to work hard. Stock options, having lost their "incentive" purpose after 2000 market correction, were not replaced by any other mechanism. Stock awards are an insult to any thinking person. As mentioned on this blog, even for level 65 they are a "whooping $18K/year".

2. Saving $60mln/year by nickel-diming the employees out of their 15% ESPP discount, while at the same time spending $2.4BILLION on "we won't tell you, but it's really good!". The arrogant cost-efficacy campaign brought onto the masses by a Dell-bred HR chief resulted in passive-aggressive "F*ck you" from the employees. It will cost much more than it has saved.

3. Irresponsibe hiring into marketing, finance, and other support organizations that don't contribute to product development. Just compare:- 1999 Annual Report Income Statement (in millions): a) Research and development expenses: 2,970 b) Sales and marketing expenses: 3,231 c) General and administrative: 689 Net result: support functions cost 1.31x research and development

- 2005 Annual Report Income Statement (in millions): a) Research and development expenses: 6,184 b) Sales and marketing expenses: 8,677 c) General and administrative: 4,166 (!) Net result: support functions cost 2.07x research and development, a 58% increase over 1999.

We all see the outcome of this misplaced spending in inability to ship any good product on schedule.

4. Missing every software innovation trend because of poor understanding of technology. Ballmer's ignorance can be downright comical, if it wasn't so damaging. During SQL Server 2005 launch he got on stage and enthusiastically told everyone bogus performance numbers that he's just MADE UP. Microsoft had to subsequently edit out that fragment from the launch video, after Oracle caught him lying. He doesn't even know products of his own company, let alone those of competitors.

......(and the list goes on).

Bottom line: a sales guy running a technology company will always run that company into the ground.

Techfest is a big farce, more like an egofest from MSR management and senior researchers

Hmm, MSR is a great example of hiring world-class computer science jocks and then producing minor contributions to the state of the art and almost nothing to the products (dont tell me that crap about sidebar, terra server , and stupid gizmos because that is not research, just advanced engineering prototypes)

Microsoft Dynamics is a joke. We wasted billions of $ to buy Navision and Great Plains.

We've been wasting money in Windows Mobile for 11 years. The management there has no clue. Consumers and even pro-sumers don't want to run Office on their phones, at least not for the next 5 years. People just want things simple. What's so hard to understand? When was the last time you saw someone using a Windows Mobile phone that isn't a MS employee? btw, WM probably has the highest manager-to-reports ratio in the company. Directors are everywhere. Some don't even have direct reports. People get prompted quickly there also.

For those of you who are waiting for the rumored increase in compensation, stop holding your breath. I have heard it directly from our Corp VP and confirmed with friends in HR that it ain't happening. Maybe some relatively minor changes to the review model, some tweakage of benefits, and of course building enough new office space to make Mini have seizures, but that's about it. With us taking a beating over increased expenses, do you really think the exec's are going to approve even more in the form of ongoing employee compensation?

another anonymous wrote "Even AdSense is becoming irrelevant as web newbies learn to distinguish the ads from the search results. I personally use Google search almost instinctively (I pine for the days it didn't blow) mostly because all the other search engines suck just as bad and there is no compelling reason to retrain my brain. That said, never in my years of using Google have I EVER clicked on a sponsored link, ever."

That sounds like faulty reasoning. In college I had friends that never paid for software like Windows and Office, this doesn't mean that they aren't valuable multi-billion dollar businesses.

Extrapolating the value of a business based on one person's anecdotal experience sounds like faulty reasoning to me.

I wasn't extrapolating the value of a business based on my own experiance. I pointed out I have never clicked on a sponsored link to prevent anyone from saying I was supporting Google by using their search engine (even though I think their search sucks now days). Just because your friends in college were unethical (I am assuming by saying they never paid for windows or office you mean they pirated it, if they didn't use it at all then your argument really makes no sense) doesn't mean the world as a whole is. There is a big difference between not paying for software that is sold (not ad supported) and not clicking ads in software/services that ARE ad supported. My whole post was really to point out that Google, despite all the hype they get, hasn't produced shit that is original, innovative or of any use what so ever since they first launched their search engine. In their mad dash to diversify their revenue streams they have "released" a bunch of half assed beta versions of things that aren't compelling and for which I would not pay a dime. The only reason Google gets any attention is because they are allegedly the anti-MS with their vaunted (and complete bullshit) Don't be Evil mantra and their love of open source (as long as it isn't their shit that is open source, you should write them and ask if you can look through their search engine code). Here is some entertaining reading if you DON'T think at least 30% (probably much more) of AdSense click throughs are accidental

http://news.bbc.co.uk/1/hi/technology/4201343.stm

I'm sorry if I go against the concensus that ad supported software is the future of the world, look at the problems TV is having with a simple device like Tivo which allows people to skip all advertising (which they are doing in droves). There is also no shortage of plug ins for browsers that allow you to filter ads. If no one is viewing ads advertisers aren't going to pay shit to have them there. I do think MS needs to lower its pricing or come out with more options on some of its software so you don't have to pay so much for shit you don't ever use (80% of Word for instance). The ability for dynamically building software packages is LONG overdue, if I could go online and buy just Microsoft Word, and include just the features I actually want/need (with the ability to add the others at a later date) and have the price of the product determined by the mix of features I chose I would be SO happy. Also it would allow Microsoft to see exactly what people really want, ie they won't pay for shit they don't want and feature areas that exist for the sake of their own existance can die because no one wants their shit. We are at a state where we just cram more and more shit into every product, bloating the distro, frustrating 95% of our customers who will never use any of the shit we are forcing on them, causing prices to remain artifially high (justifying the cost by all the "new, innovative features" we add). If you fundamentally disagree that ad supported software will revolutionize the world then I suppose only time will tell, I know there is a lot of hype around services and software that is free to the consumer, but that is only true if the consumers oblige by clicking through the ads that are pushed on them by the software. I don't believe most people will, even if you are looking for something specific people generally want advice/info from people they can trust not advertisers shilling for a product, piling the bullshit on so high you can't see the sun anymore. Again, time will tell maybe I am totally off base and in the future users will love ads and advertisers will get millions of click throughs from appreciative consumers of all the software that their ads support.

"The success of Xbox 360 and Xbox Live is enabling Microsoft to begin to redefine how people create, deliver and experience entertainment. And they put us in a unique position to succeed in huge new markets"

Help me understand how a product line that has racked up $5-6B in losses so far, is still unprofitable (will cost .15/share in earnings this year alone) and is no where close to being the market leader (esp in the most critical market - Japan) is a "success"? The best case scenario that I've seen, calls for Xbox to perhaps reach profitability by June/July of next year and then maybe contribute .05/share to income. So pop quiz: how many years of .05/share in income will it take pay back the $6-7B that will have been expended at that point far less make a profit sufficient to have made the whole monsterously stupid excercise a smart move? The other poster got it right - MS's "big bets" are nothing more than bonfires to Bill and Steve's ego fueled by shareholders cash. While this mgt team pours $10B's into asinine, money-losing, and poorly-executed ventures, competitors like GOOG, YHOO, CRM, RNOW, etc. etc., are putting much more modest modest amounts of capital into wise investments that pay off either right away or at least within some normal 3-5 yr period. Any moron can blow $B's to create profitless growth streams. What takes intelligence is to create profitable new growth areas with minimal amounts of capital. MS's biggest problem (beyond its current leadership team) is the strong balance sheet. If the company weren't so ridiculously over-capitalized, then new initiatives would have to stand on their own, which in turn means they'd have to be much better thought out, much better executed and have a much more reasonable payback timeframe.

Talking business, with the amount of market cap lost, does it make sense to acquire Yahoo to get a leg up against Google? 32B of market cap was lost yesterday. Yahoo's cap is 46B. Assuming MS can acquire Yahoo for 70B, is the extra 70-32=38B worth a) becoming the #2 in Search b) acquiring a proven ad network c) gaining a profitable online division

I've been at Microsoft long enough to have gotten options on my start date...

Awhile back, I took a couple of days off to interview just to see what's out there. Amazon: people were nice, but the stack (Unix/Perl) wasn't too interesting and I didn't see a long-term upside. Google: people were interesting and smart, but things seemed more like chaos than innovation/engineering, and Mountain View is where the real action is.

So, I decided to stay for a little bit longer. Mini gave a voice to some of the things I was thinking and LisaB gave me some hope.

Yet, after this latest stock debacle and no other changes, I'm considering moving on... again. But where would I go -- some "Web 2.0" place?

For the sake of argument, let's put ourselves into SteveB's shoes. Steve knows Microsoft has fundamental problems. Nothing we say here is news to him. The franchise businesses (Windows and Office) are facing compressed margins and decelarating growth; they're running out of steam. (Not even mentioning the problem of getting Windows out the door.)

Steve knows what one of the finance people has already pointed out: none of the other new businesses are going to produce a profit margin like Windows and Office. Microsoft will become a conglomerate of moderately profitable businesses, producing a decent return on investment -- but the days of stellar growth are over.

So what do you do if you're Steve? The only thing you can do: invest in new businesses where you can, cut costs where you can.

Succession

Steve also knows, as any CEO knows, that he has to plan for his succession. Somewhere, locked away in a safe somewhere, is a chain of succession for CEO. If Steve gets hit by a bus (God forbid), there's a name of who will take his place. One would expect that the first three names are Kevin Johnson, Jeff Raikes, and Robbie Bach. I believe these three were promoted to "President" to provide a "bench" for the next CEO.

Steve will step down when he thinks doing so is right for Microsoft. My money is on KJ, but KJ has a job to do first: fix the Windows business. If he does that, you'll see him as CEO by 2010.

Disillusionment

Two things have disillusioned me given the events of the last two days:

1. While I liked SteveB's note in general, it was a bit discouraging to think that he (and the leadership team) learned a lesson from Thursday's news. When you surprise the street with a 10% reduction in your FY07 guidance, isn't it logical to expect a 10% reduction in your stock price? Aren't there finance people who would have provided a "heads-up" that this was a likely reaction?

2. The huge disparity in rewards for partner-level vs. the rest of us. L65 is considered a "principal" level -- a pretty darn senior level as has been mentioned before. $18K worth of grant vs. $1M for the SPSA partner-level round? It doesn't make sense. We have a caste system. There are good people at all levels in this company.

"Apple can charge $100 for an OS update and people are happy to pay it because each update contains tangible improvements. If Microsoft can escape from this "done" mentality and produce honest product upgrades (instead of redesigns and feature churn), it would make more revenue from that alone than Amazon and Google combined."

Agree 100%. MS has put out too many marginal upgrades for years which resulted in increasingly muted take up and now, rather than face that fact and fix it, they just seem to have bought this whole growth is limited due to "market saturation" and the "good enough" syndrome bullshit. So now, MS is doing a piss poor job on its core business while making massive losing bets in new areas. MS is proving Peter Lynch's contention correct, namely that in most cases diversification only leads to "deworsification".

I live in WA but work for a CA company that cooperate with MS and have several friends and ex coworkers who have been working for MS for years. I have to say MS have some of the best and creative people I know. It beats me why the upper management is pulling the legs of its employees.

From the posts I've read here, upper management is where the problem is. As an employee, there is nothing you can do against them. Either you follow the order or leave. But eventually upper management has to listen to share holders. The problem now is Ballmer and Gates have too many shares that it becomes difficult if not impossible to force Ballmer or others to quit, so the mechanism is really broken.

Only an idiot would expect a prototype to have production quality code. It is a proof of concept and a starting point --not a final commercial product. In addition calling for the elimination of MSR or the firing of any decision maker who decides not to productize a technology which may later be developed by a competitor is less than idiotic and shows complete lack of understanding of both business and product development.

I believe you just described a lot of managers at Microsoft. They're the ones in the position to authorize the use of MSR technology in the product groups but choose not to because MSR's code is "crap" according to them.

It is difficult for managers to take credit for an idea if they don't understand it.

If they could rip off the idea and implement it as their own, you would see a lot more technology transfer at Microsoft.

Try putting more comments in your code. :) Maybe a tutorial too. Patent it first though.

"MSR is a great org with most excellent and talented people. It is a great asset to Microsoft in general and the product groups in particular. It is also a place where you can see a VP that is worthy of leading such a pool of talent."

Monopolies have been known to amass talented people: Xerox, IBM, AT+T, and now Microsoft. Sort of like rich people buildin meusiums. Great showpieces, but rarely have any meaningful impact on their benefactors attitudes.

The entire email was upbeat, about how we are making the right decisions and investments, and about how great a future we have.

And suddenly in the very last paragraph he talks about the "lesson" his senior leadership team learnt from the market reaction. So what exactly is the lesson he learnt? Am I missing something here. Can someone care to explain please.

In Reality, More Than Anything Else, It Has Been The POORLY Performing Microsoft Legal Department That, Seems The MOST TO BLAME For Microsofts' LOSS of STOCK VALUE, Poor Performance Since 2000 (Not EVEN Software Related)!!!

MSR topicHey, if at the end of the day, I can install something from MSR that makes me more productive, I'm happy. I still use SiS today, and am proud of it. It does what I need, when I need, and gives me some flexibility with my indexing. When you've got GB of pst to search, stick with a tool that works.PS. Anyone know what happens to old projects like this? I hope it's not in a bit bucket somewhere...I cry a little every night for all the prototype code we throw away...maybe that's why I still run SiS.

The challenge is that most MSR people just focus on doing pure research and creating demos. They don't know how to ship. They care most of their own ego with recognition and publication.

MSR management is fully aware of the problem so they are trying to change the culture by introducing more incubation projects. Speech, Tablet PC, Live Labs, SPOT, and a new MSR Incubation team created most recently are some examples.

It is unclear if MSR can change the culture at all. First, most researchers are self centered and they don’t want to change. They know how to complain since that is what most researchers are trained for with their own critical eyes. It is no wonder they often blame product people for their own failure. The best example is that MSR never delivered a workable search engine for MSN to compete effectively with Google. Given the Google challenge, how can MSR brag about their world-class talents? In the end, BillG was forced to hire an outsider to create our Live Labs, which is more product focused. The fact we have to create Live Labs told the whole world MSR is incomplete to deliver any needed or useful technologies for our product groups.

MSR is laughable. Innovation and Execution go hand in hand. If you have the brains to think of an idea, you should have the brawn to implement it. Don't give me excuses like it's not production code. You would think with 600 PhDs they could write a line or two of bug-free code.

Quit making excuses and hold each and every developer to a strict set of standards.

Anonymous wrote, "If you have the brains to think of an idea, you should have the brawn to implement it. Don't give me excuses like it's not production code. You would think with 600 PhDs they could write a line or two of bug-free code."

Except that researchers are not trained for production quality code. They think and prototype. If something from MSR has not bee picked up by product group then it could only tell about the product group ego. Why do not product group people implement some of the MSR ideas? MSR folks are more trained in generating ideas and product group people are more trained in writing product quality code. Why it does not work this way?

Because some how product group (P and G) managers are given more credit from implementing their own ideas rather than the best. They need to understand that sometimes the best ideas do come from elsewhere.

Why MSR folks develop product quality coding skills? They do develop. Some who do prefer to start their own startup rather than writing code for somebody else. This is very analogous to a developer founding a startup when they get an innovative idea.

Neither MSR folks nor developers are full packages and that's why they work in a team called Microsoft. If either of them become a full package, researcher getting developing skill or a developer getting researcher skill, they tend to go to a place of higher reward.

Solution: Give credit to both G and P managers of implementing the best ideas. Of course, they would have to drop their ego too. Researchers do not feel bad acknowledging that they do not have coding skills. Why developers feel bad that they do not necessarily come up with new ideas.

"And suddenly in the very last paragraph he talks about the "lesson" his senior leadership team learnt from the market reaction. So what exactly is the lesson he learnt? Am I missing something here. Can someone care to explain please."

Presumably the lesson learned is the one any first-year business student would already know - if you significantly reduce your earnings estimates and on top of that do it without forwarning analysts and the street, you get hammered. But assuming he's not a total moron (despite 5 yrs evidence to the contrary), I think the real lesson they learned is that the market has had enough of MS's empty promises that will always pay off "next year" and general inability to drive meaningful earnings growth. Again, you'd think that having underperforming the market by 60% over the past three years, a more enlightened team might already have started to clue-in that they weren't impressing the street, but some folks are apparently slow learners. However, even these halfwits can't ignore ~600M shares trading hands in a single day, wiping out 3 year's worth of gains or $32B in one trading session, and all because Steve and company decided to - without warning - take $2.4B out of earnings instead of out of cash in the one year that the street was finally expecting to see some earnings leverage after three years of nada.

One person wrote, "decided to - without warning - take $2.4B out of earnings instead of out of cash in the one year"

How does it matter? If you are going to spent $2.4B then it will come as a debit line in the earning report irrespective of what you call it.

This probably answer all the people who thinks Microsoft could just use cash to beat competitors. Well know. All the current cash and future expected earning is already accounted for. You try to spend some of it and see the punishment.

Well anyway Bill and Steve showed the gutts to do what is the right thing to do.

If there is any investor take note, it does pressure future Google's earning too. When it is an arm race then all the fighters lose and winner takes the loot. So you may want to short goog at some point. Not necessarily today but at the right time.

"The entire email was upbeat, about how we are making the right decisions and investments, and about how great a future we have. "

You have not been at Microsoft very long, have you? Everything is always "super" no matter how screwed up. One of the things taught to senior managers by the PR firm is to always focus communications on the fact that "Microsoft is good" and to treat everything else as just tactics. At some point that philosophy was turned inwards for internal communications to employees as well.

Go back and read every mail in your inbox from senior management and you'll see the same subtext. I'm confident that you'll see the same thing now and in the future once you aware of it.

Just simple psychological techniques to aid the effectiveness of the kool-aid...

I think it's hilarious that you guys are trying to analyze SteveB's e-mails. He's such a political player that any e-mail he writes is going to be full of sunshine and rainbows. A little less naivete, please.

You paint with too broad a brush. Mark Hurd, a sales guy, has watched HP stock go up 60% in his tenure as CEO.

Yeah, but that has more to do with Fiorina disaster than the sales guy CEO. HPQ stock is still lower than when Carly was appointed (July 1999). Mark Hurd deserves recognition for pulling HP back from the abyss to 8% growth (which, BTW, is only average among Fortune 170 companies). However, HP's long-term success has more to do with two technical guys - founders Bill Hewlett and David Packard.

"The fact we have to create Live Labs told the whole world MSR is incomplete to deliver any needed or useful technologies for our product groups"

That shows how incompetent MSR is despite their smarts. Somebody mentioned they do "pure research and demos". I didnt see too many examples of pure original research at the last techfest, just obvious tweaks on last years demos.

"Help me understand how a product line that has racked up $5-6B in losses so far, is still unprofitable (will cost .15/share in earnings this year alone) and is no where close to being the market leader"

At the end of this year, you can expect Xbox 360 to have sold 15 million consoles worldwide.

PS3 might break a few million and that's giving Sony the benefit of the doubt shipping new hardware. They have a long history of falling short on initial shipments. The Nintendo Wii will sell less.

It's a cross-platform market and third party publishers are prioritizing support and exclusives primarily based on console marketshare. As the effects of that start happening, it's unbelievably hard to catch up.

With Xbox, game developers were telling MS that Xbox had better hardware, far better software, far better dev tools and was more aligned with what they wanted to make. But because they couldn't get publisher support (Sony broke 12 million PS2s before MS sold a single Xbox), they weren't able to budget any time on Xbox showcase features or games. That is, without MS subsidizing the whole game, which isn't an approach that scales very well and hurts the MS bottom line.

Unlike Xbox, which had never gone through the exercise of thinking about being profitable, Xbox 360 was designed to be a source of profit starting in year 2 and a significant source of profit going forward.

"(esp in the most critical market - Japan) is a "success"? "

Japan is a shrinking market for modern console games and is much smaller than North America or Europe. It's only in the perceptions of hardcore gamers that still have a nostalgic attachment to a few key franchises from Japanese developers.

"All they need to do is sell the parts," says Mr Myhrvold – potentially a vastly bigger market than the PC business that has come before."

Myhrvold, Silverberg, etc. all saw the opportunity 7+ years ago. But instead, Gates/Ballmer knew better. Here's a suggestion: dump Gates/Ballmer and bring back Silverberg/Myhrvold and all the others who had vision and wanted to play offense not defense.

On the plus side, if the company were to perform a stock by-back, it could get quite a bit more shares for the same price. ;)

I agree that SteveB needs to go, then again, those others mentioned (Kevin, et. al.) don't impress me much either. I'd almost rather see Ray Ozzie (or even some other fresh blood). Heck, my 2-year old could do as good a job as SteveB is.

Everyone seems to be blaming the 11% drop on the newly disclosed spend of $2.4b. It upsets them for two reasons:

1) It means the upside they were hoping to get from Vista isn't going to improve earnings, instead, Microsoft is going to spend it all.

2) It means Microsoft is making yet another big bet, and they are worried that the $2.4b bet isn't going to pay off. None of Microsofts recent bets have, so why should this one be any different.

On point #1, maybe I'm a nut, but I don't get where the $2.4b upside from Vista was coming from anyway. Microsoft already has a a monopoly in windows os, and a de-facto monopoly in office. What this means, I think, is that nothing really changes economically just because Microsoft releases a new OS. The same number of OS's get shipped each year and the same percentage of machines will be delivered with office. The only way for Microsoft to see $2.4b Vista upside is if there is a huge increase in the number of PCs sold, or if they raise the price of windows and office. Correct me if I am wrong (which I probably am), but isn't it an illegal abuse of their Monopoly of they manufacture the $2.4b of upside my raising prices across the board? Of course another option would be a mass upgrade cycle, but given the compute requirements of Vista and Office 12, its pretty unlikely that you will see mass upgrades to Vista. The most likley scenario for Vista is that it comes from an OEM, pre-installed, on a new machine with sufficient resources to run it.

On #2, first, I don't for a minute think that $2.4b is a realistic bet for Microsoft. The thinking is that this is what its going to take in order to create the Moogle, the new data centers, the people to run them, the people in redmond to build the software that makes them sing, etc. Given that Microsoft has little expertise in this area, on a mass, globally distributed scale, I think its safe to say that this is a pretty big bet. Certainly bigger and more profound than their big bet on "Integrated Innovation", the bet the bound Office12 to Windows/Longhorn with WinFS, Avalon, Indigo, and .NET at its heart. The "Integrated Innovation" bet was about software that Microsoft was arguably an expert at. They failed miserably, but they failed doing what they are best at doing (creating complex buggy desktop software). Lets look at financials, r&d spend during this bet. It was 4.3b in '01, 6.3b in '02, 6.6b in '03, 7.8b in '04, and 6.2b in '05. The total cost of the bet during the Vista fiasco was ~$31b. Sure, not all of this was spent on Vista and Office. So lets discount 1/3 of it an agree that the "Integrated Innovation" Bet was a $20m bet BUT we still have yet to include numbers for FY06, so maybe it will be ~$25b when all the beans are counted. So, Microsoft spends $25b on a new OS with some eye candy that no one really wants and people are bummbed that the $2.4b this bet was going to theoretically produce is going to be used for another big bet? I don't get it at all. Suppose that $2.4b was all going to the bottom line. To me, it still prepresents a pathetic return. Spending $25b on a big bet, only to recoup $2.4b is an abysmal return. Was this one Steve's idea?

Now, lets look at the real cost of the "Moogle Bet". Steve, why do you think you can invent a whole new business based on massivley distributed data centers, running software that you don't even have for $2.4b? You are not an expert in this space and will certainly make many mistakes along the way, will produce typical MS 1.0 software when we all know that your stuff only sucks less when its in version 3.0. All of this is going to be delivered with an unproven revenue model. Yes, thats right, and UNPROVEN revenue model. Advertising is making some money for Google, but its making this money during the user activity of SEARCH. You seem to have drunk some pretty good koolaid thats messed with your mind. You seem to think that Google is making money by putting ads on the netwrok and that people naturally want to see ads whenever they are connected, and that these ads will generate gobs of $$ in all scenarios. This is simply wishful thinking on your part. For instance, when I am working on a spreadsheet, doing my taxes, talking to my friends, writing my term paper, creating a birthday card, etc. I do not want your silly ads, and I promise not to ever click on them. The ONLY time ads are useful to me is when I am looking to purchase something. In this case, I tend to start my looking in a search engine. The associated ads presented to me, when my search is commercial in nature are valueable to me and many others. This is how Google is making its money. You are very wrong to think that this ad dynamic works in all software scenarios, just plain wrong.

Now, getting back to the $2.4b you pissed wall street off about. What is the real number? If it took you $25b to build the next version of office/windows, why in the world do you think we will believe you that its only going to take $2.4b and a year to create the Moogle you are trying to build? This is much more complicated that what you had to do with Vista/Office. Remember with those products you already had a ton of working code. All you had to do was stir in a few features. Sure they were $25b features, but its not like you are starting from scratch.

With your Moogle fantasy you have NOTHING, yet you ask us shareholders to have faith? That you will spend OUR MONEY wisely on this foolish bet of yours? That you will execute with precision and efficiency? Give me a break. You, Mr. Ballmer, are a liar and a thief. You are going to spend vast amounts of money of this "big bet" and you are doing it with our Money. You have no track record of success, and you are getting in way over your head on this one. I garuntee that this bet will cost you $25b+ AND you will NEVER be able to recoup this investment.

Reference to comments regarding MSR. I 've always felt that this is just a pet project and not much usefulness (I mean share holder value) is coming out of this.

I've had many friends out of school used to work in MSR, they are mainly into prototyping and showcasing the work in hope that they get traction with product group for adoption. There are some targeted work that has come out of MSR and I don't deny that but not enough to justify the amount of money we have been pumping into reaserach.

Rather than shooting in the dark with ideas and prototype, it would be nice if MSR were more connected with reality.

I've a fix:

Why not get rid off MSR as a separate group and instead allocate reasearch budget for product groups. For growth groups like 'Live' allocated more dough. This basically means that at the PU level you get to decide where you want to put the money. Of course you can only spend it on long lead research items and we should come up with some way to ensure that. This in my opinion will result in less throw away work and more incremental innovation which will yield far better results in the end.

Microsoft's Performance Is No ShockAs a former MS employee who happily left the company in early 2005 after 12+ years there, and divested every penny of MSFT stock shortly after exiting, I feel a little vindicated at my decision. The biggest threat to Microsoft is not Google nor Yahoo - it's Microsoft. I saw the writing on the wall starting back in 2001 or so, a company slowly beginning to collapse in on itself like a black hole remnant after a great supernova. The bureaucratic controls, spending cuts, and overall quality of management plummeted in general (some groups are better than others). My own management and group was a joke, an aggregation of brown-nosed, ladder-climbers who have dreams of billion dollar fortunes like their upper VPs, something they'll *never* attain in this company (and I mean never, not anymore). Group after group that I was involved with had a rampant morale problem, from real cuts in benefits to rumors of discontinuing free drinks and so on. The people I converse with regularly who still work there give me the impression that the trends I knew firsthand are only worsening. So personally I revel a bit in Microsoft's tripping up - but I do have real concern for my friends and colleagues still there and only wish them the best, at least in their individual positions. Now they talk to me like I pulled off some miracle, asking "What's it really like on the outside?". No, Microsoft's not going to cave in but I hope this serious speedbump is a sign to investors that something really isn't right with the company - a fact most employees who don't buy into the MS corporate religion fully understand.

"At the end of this year, you can expect Xbox 360 to have sold 15 million consoles worldwide."

Based on the current run rate, I think it's highly unlikely that even 10M will have been sold by that point. But apparently you're hoping for a major ramp in weekly sales and/or a HUGE Xmas. Regardless, having blown so much on Xbox to date, I guess I have no choice but to hope you're right - although that should tank earnings nicely (which perhaps explains a large chunk of Thursday's guidance debabacle). And while I appreciate you taking a shot at answering my question about payback, your response that "Xbox 360 was designed to be a source of profit starting in year 2 and a significant source of profit going forward" is a little on the vague side. Isn't SONY, the market leader, making less than 500M/yr off their gaming business? So if MS could swap market positions and returns with SONY tomorrow (which they of course can't), it would take something like 10 years just to pay back the money invested so far. Hard to see how that's a wise business investment, especially when immensely profitable core businesses like SQL and Windows are so screwed up that they're on 5 year gestation periods. But maybe we should be thankful that, while it will likely never recoup the initial investment, Xbox will eventually provide a sustainable YOY profit - unlike say that even more expensive and longer-lived sinkhole MSN.

I think it's hilarious that you guys are trying to analyze SteveB's e-mails. He's such a political player that any e-mail he writes is going to be full of sunshine and rainbows. A little less naivete, please.>>

Speaking of naivete, don't be naive enough to think that Steve even writes those emails... these are all written by a PR wonk in building 34 not by our fearless leadership... which is troubling in and of itself.

MSR is yet another dinosaur research lab, like Bell Labs and Xerox Parc before it, with tons of smart academics, but few people who can really do anything useful. History has already proven that detached research teams are little more than corporate dead weight. What you really need is those smart people in the trenches. Many researchers can write excellent code, but most are simply too lazy to bother, and prefer to bitch and moan when a product team refuses to wipe their ass. MSR Asia is particularly bad. It seems that every time someone there takes a crap, a lousy paper falls out. It's made several recent academic conferences quite stinky. Research -- yet another thing GOOG does better than MS.

On a related topic, what about the AutoPC group? Has anyone *anywhere* ever seen an "AutoPC" unit installed in a vehicle anywhere? This is another "bet" which Microsoft invests in for last 8 years with no single cent in profit so far.

"I'd say that their CEO recently leaving them high and dry for Google has more to do with it than any intrinsic quality of Live over Google search."

Nops. Revenges happen at personal level. At an enterprise level it is the money which talk. For a well-funded startup it is the right technological and marketing partner. Seems like Live has started beating Google. I guess this is just a small start.

First of all you should never let a marketing guy get anywhere near the helm for the long term goodness of a company. They just think that they can pass a sheep for a cow with their sweet talk.

I remember seeing Steve's comment somewhere that "we just need to ship 'something and it doesn't matter what', we will automatically make the money".

It's a pity that of late we are not even able to pull that...

I can't believe Steve thinks he can put a spin on anything and get away, typical marketing bragging. I can't believe the way he was answering questions in a MSNBC interview a while back, his answer had no relevance whatsoever to the question, sure it was its long boring self though.

Looks like Steve's quick fix to the problem is moving more marketing bozos as department heads. He is pissed that we can't even ship 'something'

Sure he will get his wish someday, we will keep shiping 'something' year after year (with 'nothing of value') so that the executives can pat themselves in the back with hefty bonuses.

For some reason, I feel that the market for home game consoles is shrinking. Xbox360 is losing to Sony's and Nintendo mobile players in Japan in terms of unit sales. Mobile players will dominate in the next decade. I feel that we entered the game console at the peak and our investment may not pay off.

The Windows Mobile OS should be killed . There was no reason to not adapt the NT kernel and OS(with changes) for the embedded market as soon as Windows2000 was done. This would have saved us a lot of money. Not to mention the software development problems we would have avoided - building applications for Windows Mobile and WinXP are very different even when the API sets are somewhat similar.

I think there are even bigger black-holes that I would target before MSR. With MSR I at least can see something being produced - a paper here and product transfer there.

Take a look CraigMu's or DavidV's orgs? While not as large as MSR WTF do they do? Craig's got a whole set of "researchers" in Santa Barbara and a satellite office in Aacchen Germany. He brought back Peter Neupert who never did anything at MS, ran Drugstore.com into the ground and is now rewarded with a Corp VP title.

DavidV has whole branches of his org with the title principal PM - I'm sure they get a lot done.

As someone earlier said - MS is ridiculously over capitalized. The problem is Bill and Steve aren't using that money responsibly. I remember around the time of the big divended SteveB ranting about "it's the share holders money, it's the share holders money". That's right Steve/Bill it is and you have a responsiblity to spend it wisely. When the next DavidV comes to you and says I'm tired of my day job can I have a fun play around job and spend millions of share-holders money? The answer should be - we appreciate the hard work you've put in here but we need to spend our money wisely we have a responsibilty to the shareholder to do so. So David appreciate what you've made here but play around on your own dime.

Wow...lots of Balmer bashing. It's not ALL his fault. As the leader, he shares SOME blame, but the hatred being spewed here is really ridiculous.

The product teams shoulder most of the blame, since they can't get the big cash cows herded into regular schedules. Every time they try to improve things, the delays get even larger.

Here's a novel idea: Instead of having a bunch of managers that probably don't even remember how to compile code create the product schedules, ASK THE ENGINEERS!

I'm just as bitter as many of the folks posting here. But I still work there. So I'm going to try to point out some of the positives.

Windows Mobile - GREAT platform, and getting better with every release. It's a great tool for keeping people in touch w/ the office. One hand emails are a breeze on something like the Audiovox WM5 phone. New form factors are coming out, and the platform is pretty solid (i.e. reboots are rare). TRY IT YOURSELF for a few weeks before bashing it. I bet you'll be hooked. (And because this is bundled with data services, the cell phone companies love the phones. If we can make them a little easier to use and even more solid, it might only be a few years before the majority of phones are WM-based.) No, I do NOT work for the WM team :)

Xbox 360 - Yeah, they've lost a ton of money, but they are the UNDISPUTED LEADER in next-gen consoles right now!!! It was a rocky road, but we're at what...3m units shipped and counting? We'll probably have 3-4m more consoles in the marketplace before the PS3 even gets started (someone here posted 10-15m...I doubt we could even make that many, let alone sell them). Xbox live is also an amazing experience. I'm really encouraged by what this could do for the company. The microtransactions made possible through this platform should allow us to rake in even more cash as more systems get out there. When people are bored and window shopping for a new game, they can get it RIGHT NOW. If they are comfortable with the security, I wonder if we'll see full games delivered this way? There are also rumors that DirecTV will be providing HD content via the 360. Cha-ching!! That should be a pretty cheap investment for us, but it'll be another underserved market that we can tap into.

Anyone know how AT&T's Bell Labs managed to get their experimental operating system UNIX so widely used that even today Microsoft is still struggling with it and its developments? They, in effect, gave it away to academic institutions such as Berkeley. Who took the ball and ran with it.

If Microsoft (and Microsofties) wanna do something with MSR, they gunna hafta try out the Bell Labs idea. Otherwise they gunna look like Xerox's PARC, inventors of the GUI and NOT benefitting from its invention.

So that's the idea - give the ideas and code, harebrained and otherwise, of the MSR to other academic institutions, and let the students bash them into shape.

With Xbox, game developers were telling MS that Xbox had better hardware, far better software, far better dev tools and was more aligned with what they wanted to make. But because they couldn't get publisher support (Sony broke 12 million PS2s before MS sold a single Xbox), they weren't able to budget any time on Xbox showcase features or games. That is, without MS subsidizing the whole game, which isn't an approach that scales very well and hurts the MS bottom line.Okay, that is just plainly bollocks. I happen to develop on Xbox, and I developed on other platforms as well. There is absolutely nothing that enabled us to do stuff on Xbox that we can't do on other consoles.Let me put it this way: If you're a developer on PC, and all you know is x86 and DirectX, then of course Xbox is an advantage. But if you've developed real games on everything from a lowly SNES to a beast like the Saturn, then you just read the manual, look what you can do and get to work. And there is better hardware out there than the Xbox.Please have a look at the Xbox launch titles that Microsoft financed: They are mostly poor quality and made by inexperienced teams. That's why they didn't get real publisher support, and that's why they were singing the praises for Xbox.

"People just want things simple. What's so hard to understand? When was the last time you saw someone using a Windows Mobile phone that isn't a MS employee?"

Given my experiences with WM5 on a PDA, I will never use a Windows Mobile phone. A soft-boot and 48 seconds before being able to make a call is not the scenario I envision if I have to give myself or someone the 911.

WM5 is a steaming pre-Alpha microcosmic pile of the current (and future) MSFT angst.

"The Windows Mobile OS should be killed . There was no reason to not adapt the NT kernel and OS(with changes) for the embedded market as soon as Windows2000 was done. This would have saved us a lot of money."

As someone who owns 3 pocket PCs, including some of the latest model like Dell's Axim v51, I have to agree. WM always does something unexpected just like win 98. Well, win 98 might be worse; for example, every reboot didn't start at the same state that some reboot started with vga resolution on my 1600x1200 monitor and I had to reset the resolution when it happened. At least a reboot on wm5 gets it back to the same state.

But I'm getting really tired of those crippled mobile versions of office, acroread, and most other applications that I solely use my latest pocket PC as a GPS and temporary storage device. Using it for any other purposes just hurts my eyes and I'd choose a laptop any time.

“There has been a very strong reaction to our revenue and earnings figures.”

Translation: the market gave us the biggest vote of non-confidence in 5 years

“I want to provide some context for what we announced yesterday and let you know why I believe more strongly than ever that Microsoft is well positioned for sustained, robust growth in the years ahead.”

Translation: I need to do some damage control and atleast try and bullshit that yesterday wasn’t a total fuckup and condemnation of my leadership.

“In addition, we returned $5.8 billion in cash to shareholders through our stock repurchase program and through dividends.”

Translation: We managed to bilk shareholders out of another $5B of their cash to pay our insiders all why bs’g them into thinking we’re doing something positive for them. How smart is that?

“Home and Entertainment, Mobile and Embedded, and Business Solutions all turned in stellar quarters. Taken together, these businesses show a combined revenue growth rate of 68 percent year over year.”

Translation: Sure, they all went from a profit last Q to a loss this Q, but at least they’re masking our inability to grow the top line.

“All of this propels us toward the next wave of blockbuster releases.”

Translation: having badly blown all of our development schedules, we’re finally near shipping what we should have shipped at least two of so far this decade.

“We’ve always taken a long-term approach, striving to solve the hardest problems in computing and working to realize huge new opportunities in vast new markets through investments in innovation across the broad spectrum of human endeavor.”

Translation: We've always been slow as shit and can’t make anything pay off in any reasonable timeframe but if we can just keep bullshitting people that our “big bets” are “big money makers”, maybe we'll wake up and OSS and GOOG will be gone and this will have just been a bad dream.

“I believe that now is not the time to scale back the scope of our ambition or the scale of our investment. While our opportunities are greater than ever, we also face new competitors, faster-moving markets and new customer demands.”

Translation: while we’ve been preoccupied with all of our losing big bets, we took our eye completely off the ball in our core groups and now these too are now at serious risk.

“So what accounts for the negative reaction that we’ve seen from analysts and investors?”

Translation: I know it’s my/our 5 year long track record and pathetic bungling of the news but let’s at least try and deflect the blame to those pesky shortsighted analysts/investors. Sure, we're the 6th worst performer in the DOW since 1998, but how shortsighted are these folks? Don't they remember that we used to be great?

“The bottom-line result of these investments created a shift in our near-term profitability that was a surprise. The change in our stock price reflects this.”

Translation: we fucked up and unfortunately, the street didn’t excuse it this time.

“But I’ve never been more confident that we are making the right investments.”

Translation: Of course, I was the same person who said we’d win the DOJ affair, that Xbox, MSN, MBS, etc. would have paid off big time by now, that Vista would be great “bet on it” and [two years ago] that the “stock was the best poised since 1998 to appreciate”. So you might not want to take that to the bank - you know none of our senior insiders will be.

“When you look across the array of businesses we are building, it is clear that we are in a position that no other company can match.”

Translation: No other large cap tech company has managed to totally underwhelm the market as much as we have over the past 3 years. Of course, no one wants to because in any other public company, the management team would be gone. But hey, we're in a class or our own.

Translation: our idea of investment doesn't really follow the classical business definition. Basically, when we get a whim or just decide we have to be in a market, we don't waste time with all that analysis/strategy/pyaback analysis crap. Instead, we just spend as we go, often $5-10B over a 5-10 yr period, with no plan whatsoever. Then, we simply write off all that prior investment and pat ourselves on the back for creating profitability on an ongoing basis – well, at least that's the plan assuming we can ever get one of these losers to sustained profitability.

“The reaction to yesterday’s news is a lesson that the entire leadership team at Microsoft will learn from.”

Translation: We're not totally stupid. Why, every time our actions have shaved $30B off the company's market cap - 11 times on my watch as CEO so far - we've learned something. Not enough to avoid further incidents of course, but something nevertheless. Doesn't that count for something?

How many Fortune 500 companies have a CEO who has survived 6 years with a flat stock price (or down 11% if you count last week)?

Ballmer's bullying tactics and sweat stained motivational speeches are no longer what MS needs. It needs fresh blood at the top. The arrogance of the man is quite unbelievable - look at the mess this arrogance has gotten the company into up to now. Is he really the man to lead to company forward?

Middle and executive management should also be ashamed of themselves. The employee on the ground is paying the price for their inadequacies yet they continue to receive outrageous bonuses and stock benefits.

In an effort to appease the masses Lisa Brummel will announce a new review system where there is no "curve" (Simple 3 rating system: 1. you're not doing your job 2. you're doing your job 3. you're doing your job very well) - it'll probably keep people happy for another 12 months until they realize that nothing has really changed - employees still get the rough end of the stick while middle/upper management cream the bonuses/benefits.

I had so much (blind) faith in the senior management of this company but that's a fading memory now, time is up Steve - take your $14bn and do what's right for the company.

"The employee on the ground is paying the price for their inadequacies yet they continue to receive outrageous bonuses and stock benefits."

Agree with your other comments, but wrt this one, recall that MS is 80+% externally owned. As such, the people really "paying the price" for the poor combined execution of both managers and employees are general shareholders - to the tune of some $230B and counting. I understand that employees are also getting hurt both directly and via morale and am not happy about it, but try and keep in perspective who has underwritten the majority of MS's failures over the past 5 years. And please don't buy into this "money returned to shareholders" bullshit. The vast majority of that has gone to insiders (read: your senior most executives primarily) which is why shares+equivalents has never gone down despite $25+B of buybacks completed in just this latest round and something like $35B since 00.

With all due respect to the parties ivolved in the Friday MSFT sell-off, I think the underlying message was more about sending a loud warning to Ballmer than punishing the MSFT stock based on objective financial/economic criteria. At least with the MSFT investors, it seems that Ballmer has lived on borrowed time for a while; now it remains to be seen who's got the stronger will/argument.

On the other hand, I like to think of the day when those who want to positively influence the course of affairs at MSFT will build their argument (also) by leveraging the great insights from this blog!

A couple of facts to clear up from previous posts.1. Google's paid search business is AdWords, not AdSense. AdWords is responsible for more than 50% of their earnings. AdSense is responsible for the rest.

2. Microsoft's General & Admin charges for FY'05 include legal payouts stemming from the DoJ case (IBM, Gateway, Novell). They're almost done--I think RNWK will come in FY'06, but there are no more (until the next lawsuit of course).

3. Microsoft is raising prices in the next versions of its monopoly products, but subtly, through all those different SKUs. Hint: you probably won't be able to find an OEM machine with Windows Vista Home Basic (except dirt-cheap doorstops), but will be paying an extra $20/copy for Vista Home Premium.

Now the main point:

Microsoft's core strategy for the last 15 years is protecting its two monopolies while praying hard to find another one.

That's it. Nothing more.

Microsoft is spending $2.4B on DEFENSE. They want to outspend Google while undercutting their only business--online advertising--and waiting for them to crash.

I have absolute 100% confidence they'll succeed in this tactic. Look for GOOG to be 1/4 of its current value by end of '08--their current streams are about to be cut in 2/3, and their future streams are nonexistent.

But...look where Sony is today. A struggling shell of its former self, 10s of thousands of layoffs over the last three years. The PS3 will slip past Xmas, will be priced so high that it won't capture any market share at first while killing remaining PS2 sales, and that's it--their single most profitable business gone.

And why did MS attack Sony? Fear that the PS would become a viable competitor to the PC, and Sony's refusal to play ball in the home.

Will all of this create shareholder value? No. Will MSFT go up as a result? No. Will MSFT get to survive instead of becoming the next IBM? Yes. Put yourself in these guys' shoes--they're paranoid and have been around for a long long time. They give two shits about shareholders--they just know the tech industry's subject to extreme turnarounds and they will counter them with every tactic they can think of, including borderline legal (but next time, settle BEFORE going to trial, boys).

Problem in a nutshell.Example, the dinosaur ads vs this:http://www.msnbc.msn.com/id/12580184/site/newsweek/.Using your OS and Office software our income/stock in company rises each year much better than yours.It seems that someone somewhere in Redmond forgot how to sell goods and services.People ready? Where's the information for small business?Is there not an r&d team there that focuses on cash customers?If we could employ 60 plus thousand people I'd be damn sure that there were at least 60 people like Scoble to promote my product full time. Channel 9 is a great way for a consumer to learn about really cool stuff that you guy's are working on.Damn shame that some of this "innovating" apparently can't get out the door fast enough.

"Will all of this create shareholder value? No. Will MSFT go up as a result? No. Will MSFT get to survive instead of becoming the next IBM? Yes."

This and your comments before about sum it up. MSFT has given up on trying to play offense and is just playing very expensive defense with shareholder's money. Maybe they'll get away with that forever or maybe, like Friday's $31B haircut, shareholders will say enough is enough and sell this POS into the low teens and/or seriously lobby for a change of management. My bet is on the low teens price - which may in turn may force the change in management.

"MSR is a great org with most excellent and talented people. It is a great asset to Microsoft in general and the product groups in particular. It is also a place where you can see a VP that is worthy of leading such a pool of talent."

Holy Buckets. That is the biggest tub of shit I have read in a long time. Hopefully you are talking about Dan Ling - he's smart as hell and isn't afraid to smack poor performers. (Yes Virginia, I worked in MSR)

Rashid (and his narcissistic cheerleading pet poodle Schofield) are too caught up looking over their shoulders for Craig Mundie to exhibit any real leadership. Which begs the question: If MSR is doing what they should, why does MS need a TCI?

Things that make you go hmmm.

There are incredibly talented folks in MSR - and there are just as many buffoons.

Xbox 360 - Yeah, they've lost a ton of money, but they are the UNDISPUTED LEADER in next-gen consoles right now!!!

Look up "Dreamcast" some time.

(Although I have to say, even as an ex-Xboxer who expected the 360 to get steamrolled by the PS3, it looks like Sony may end up forfeiting the title this generation if they don't get their act together).

1. While I liked SteveB's note in general, it was a bit discouraging to think that he (and the leadership team) learned a lesson from Thursday's news. When you surprise the street with a 10% reduction in your FY07 guidance, isn't it logical to expect a 10% reduction in your stock price? Aren't there finance people who would have provided a "heads-up" that this was a likely reaction?

In theory there would be good Finance people around. The reality last Friday is as follows:

Corp Controller: Open PositionVP CSPA: Open PositionGM CSPA: Open PositionCFO PSD: Less than 3 mos in roleCFO BD: Less than 3 mos in roleCFO ED: Open Position

Allegiance? ;) Seriously, the only company brains trusts that actually had any effect on the industry, were those that had virtually unfettered access to Universities and the rest of the industry. It helped keep them honest and thumped them into shape when they weren't.

You can just see SteveB or BillG's reaction to that, can't you?!

Yours EponymouslyEpon

Completely off-topic - since Linus Torvalds has named two products after himself - Linux and git ;) - did BillG ever considered renaming MS-DOS after himself? BillGE ;) - for the Bill Gates Executive? (You can't really call DOS an OS - it's more of an embedded executive.)

And Steve, Bill, Liddell and all the other senior managers (who had to have been involved in at least the spending plans part of the fuckup) are collectively too ignorant to understand that stock prices are a function of earnings estimates and if you dump the latter (especially unexpectedly) you're likely to negative impact the former? Pullease. You would have to be a complete idiot to think that after dissapointing the market for more than 3 years, you could come into a call, miss your own earnings guidance for the Q, guide Q4 earnings down more than 10%, guide FY 07 earnings down ~14%, refuse to provide any details and then not take a tremendous stock hit. There are two options: Steve et al are complete morons or they fully knew what the likely consequences were and did it anyway. You decide but as a shareholder, I don't find either option encouraging.

Not only is it one, it's been MS's for more than a decade. It's just not one that can be sustained indefinitely - as is increasingly obvious to all. Well, all except perhaps MS's senior leadership, who just keep trying the old ways and keep being dumbfounded when they no longer work.

Bullshit. There are lots of cool ideas coming out of MSR (Wallup, Slam, to name a couple). In the hands of less disfunctional company, some of these ideas would be generating dollars. Maybe not OS level dollars, but dollars nonetheless. And with some luck, you might just stumble across another cash cow.

Unfortunately, Microsoft doesn't recognize a money maker unless someone else is already making money off of it. Then it's too late. And petty politics ensure that creative ideas in the company are ignored or torn down by anyone who can't take credit for them. For example, see the above quote and all the other comments just like it.

Okay, that is just plainly bollocks. I happen to develop on Xbox, and I developed on other platforms as well. There is absolutely nothing that enabled us to do stuff on Xbox that we can't do on other consoles. Let me put it this way: If you're a developer on PC, and all you know is x86 and DirectX, then of course Xbox is an advantage. But if you've developed real games on everything from a lowly SNES to a beast like the Saturn, then you just read the manual, look what you can do and get to work. And there is better hardware out there than the Xbox.Please have a look at the Xbox launch titles that Microsoft financed: They are mostly poor quality and made by inexperienced teams. That's why they didn't get real publisher support, and that's why they were singing the praises for Xbox.

Just because the particular developer you worked at didn't feel like doing anything unique with the standard Xbox HDD or Xbox Live doesn't mean what I said is bollocks.

Kudos to you for being so smart that you can slog through the pain of getting games running on PS2, though.

And you try getting your own downloadable content running on another console.

I'm sure you recognize that building a platform off x86 and straight PC parts obviously isn't the best way to build hardware. It was a time-to-market decision. The direction taken for Xbox 360 hardware is a nod to that.

The stock closed down at $24.01 today. I was thinking it might actually recover close to $25.00 by the end of the week (hovered around $24.30 all day yesterday, up from the $24.15 it closed at on Friday).

"The stock closed down at $24.01 today. I was thinking it might actually recover close to $25.00 by the end of the week (hovered around $24.30 all day yesterday, up from the $24.15 it closed at on Friday).

Now I'm wondering if it'll sink to $23.00 before June."

After Friday's carnage, it was obvious the stock would take a run at breaking the 3-yr low. It came very close intraday today but managed to rally slightly towards EOD (probably the company doing some creative tape painting to try and avoid a new closing 3-yr low). And while it's oversold and therefore could rally to $25 and change at any point, continued negative fallout from Thurs earnings call, a Gartner report today saying Vista will be delayed another 3 mths (which would be fatal to whatever credibility management has left), the already forecast weaker Q, the lack of any meaningful clarification on the spending plans until the analysts meeting in late summer and the seasonally weak market period we're entering, should all contribute to the 3-yr low being broken shortly, which will bring the 5-yr low into play as the next obvious test. In other words, odds of $23's by June and likely before are [unfortunately] excellent and a failure at the 5-yr would likely lead to a new all-time low - maybe even as low as $19 and change. Great job Steve and the rest of the management team. Be proud. You suck at just about everything but when it comes to destroying shareholder wealth, no one's better.

I have watched this blog for a while and I think for the mostpart you are right on especially about reviews, middle management, etc..I can give you email after email of Internal processes to show what is wrong with the company and middle management, but that is probably for another time.

As far as earnings and missed dates go, I think one obvious point is missed. One of the reasons Microsoft is in this mess because of bundling.

If you want a lean Microsoft, someone needs to trim back Mirosoft's view of an OS. The Windows team should concentrate on core services like UI, memory Management, etc...

There is no purpose to say that IE is part of the OS and tie a windows relase to an IE release. The same goes for Media player, Media Center Edition, Messenger, .NET or any thing else that is not core to an OS function. I do think we should put our own products as part of the OS release when possible, but the market will eventually dictate who has the best stuff and that should not be seen as a competitive threat, it should be seen as a standard to try to reach.

Anyhow, once you trim away all the layers associated with Bundling, it should be pretty clear on where the problems lay.

Microsoft can easily release an updated version of Media player after the OS release that has any missed functionality that wans not available for the release. Microsoft can sell the Media Center stuff as an Add-on pack or create a subscription based service to get add-ons for valid versions of the OS.

As far as Steve B's comments go, I agree, underperformers should be gone. We have constantly missed ship dates on all core products, underperformed as a stock for 8 years and only seem to get direction from where we think our competition is going.

I wonder if the people who have real power to make changes ever realize that they are the ones underperforming and hurting the rest of us.

"Myhrvold, Silverberg, etc. all saw the opportunity 7+ years ago. But instead, Gates/Ballmer knew better. Here's a suggestion: dump Gates/Ballmer and bring back Silverberg/Myhrvold and all the others who had vision and wanted to play offense not defense."

You have to be kidding! Silverberg wouldn't know how to run a lemonade stand.

This is a $40B revenue / $12B profit we are talking about. It would be a disaster without Gates and Balmer.

Granted there are alot of problem. Balmer is not getting rid of the right 6.5% deadwoods. The sales force is arrogrant and alienate customers and besides that, they are overpaid. A bunch of monkeys can do a better job selling. That said - it's still the only software company that makes $12B in profit. Other than oil, drug pushers, or arms makers - there isn't a more profitable business.

So I'm not a big fan of the fact that we've delayed Vista and of our piss poor leadership. Enough has been said on that topic and I agree with all of it.

But regarding the Gartner stuff. I HATE GARTNER with a passion. They are a bunch of blow hards, who don't listen to us when we have something to say and make up half their other stuff. I would LOVE to see us make total fools of them and release well before their predictions.

Microsoft has scheduled a five-month interval between Beta 2 — which perhaps 2 million people will test and provide feedback — and manufacturing for Vista.

"We believe more time is required between a stable, feature-complete Beta 2 and (manufacturing) to accommodate the issues expected during broad testing and allow for at least two (release candidates)," Gartner analysts wrote.

Microsoft expects five months to be enough because it has released preview versions of the operating system. It's planning only one release candidate.

Five months to fix problems found by customers in a product as complex as Vista? Hmmmm.

Google has raised objections over Microsoft's plans to integrate its new search engine into Internet Explorer 7, press reports indicate. The company's concerns have even led Google to speak with the Justice Department and the European Commission.

Much like Firefox does with Google, the new version of Internet Explorer will be set up by default to send search queries to MSN Search. Google contends that this gives Microsoft an unfair advantage over its competitors.

Do I see a crack in the Do no evil! armor?

Google is complaining that Microsoft is doing the very thing they are doing.

The sales force is arrogrant and alienate customers and besides that, they are overpaid. A bunch of monkeys can do a better job selling.

From our perspective, our developers are arrogant and not customer-focused. Customers frequently remind me that a bunch of Open-Souce amateurs are producing far more robust code in a timely fashion, than the developers with far-and-away the biggest development budget inthe world

From our perspective, our developers are arrogant and not customer-focused.Obviously they are arrogant. Everyone knows what the code should be. It must be "customer-focused", "safe", "efficient", "foolprof", etc. It is not hard to just remember all these words. But it does not help creating working code. Developer is the only person, who has a chance to make it. And nothing from these marketing spells will help. Good developer just knows that good code should do the right things in the right way. If you are able to do this against all these specs, styles, instructions and advises, you will create a good code, which will be appreciated by customers, until the new boss will damage it in the next version.

Wow... I just read Scoble's blog about how to extingish Mini-MSFT - I was impressed! The guy is such a master orator, and is able to suck up to Big Brother in an inconspicuous, subtle manner. No wonder he's pure management- he has _mastered_ the lingo!! I actually kept thinking for the longest while that technical skill and merit gets you far up the company ladder - until recently, when I decided I'm gonna go for my MBA... Scoble's oratorial manner impresses me. I am betting he's even more personable in nature than he is at the blog. Bravo (I am _not_ being cynical - I admire the way he said his piece!)

Disclaimer

These are sole individual personal points-of-view and the posts and comments by the participants in no way represent the official point-of-view of Microsoft or any other organization. This is a discussion to foster debate and by no means an enactment of policy-violation. These posts are provided "as-is" with no warranties and confer no rights. So chill. And think.